The global economy remains plagued by uncertainties, with doubts mounting over the sustainability of the US recovery and emerging markets, particularly China, struggling with various headwinds.
The grim backdrop could, however, help rather than hurt one sector in Hong Kong — the office property market.
Let’s explain why.
The US Federal Reserve may not raise interest rates as much or as fast as previously feared, property consultant Colliers noted in a report.
Even if the US economy accelerates, other countries could very well move in the opposite direction.
As bond yields are falling to factor in a weaker growth outlook, and return on bank deposits is still at ultra-low level, the office market’s yield of around 3 percent looks comparatively attractive.
This is especially so when equities may not be a good option amid China’s continued slowdown, the report said.
Some deals inked recently in Hong Kong already point to the growing attractiveness of the local office market.
China Everbright snapped up Dah Sing Financial Centre for HK$10 billion last month. In November last year, Evergrande Real Estate Group paid HK$12.5 billion for Mass Mutual Tower, also in Wan Chai, setting a record for office building price in Hong Kong on a per square foot basis.
A steady stream of mainland financial firms wanting to set up offices here has been fuelling demand in the segment.
Mainland firms generally prefer to own their properties so as to eliminate the risk of rental increment over the long run. Acquiring office blocks also represents a simple way for them to invest overseas.
In particular, insurance firms can now buy foreign properties under China’s newly relaxed investment rules.
Given that only limited office properties are expected to be put up for sale in Hong Kong, the sector is expected to do well regardless of the economic uncertainties.
“Within the commercial property, the office segment looks like the safest. We believe the prices for en-bloc office purchase in Hong Kong will hold up well in 2016,” said Colliers.
“More big-ticket transactions will emerge in the office investment market.”
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