Commercial property investment volume up 5.7% QoQ to $18.1b in Q3

A total of 20 transactions were accounted for during the period.

The total volume of commercial real estate investment involving deals worth over $77m, excluding pure land or related transactions, rose by 5.7% quarter-on-quarter (QoQ) to $18.1b in the third quarter, according to CBRE.

In a report, CBRE said only 20 transactions were registered during the period, which is less than half of the total signed in the second quarter and is at the same low levels seen from the fourth quarter of 2019 to the third quarter of 2020.

Year-to-date, the total investment volume is at $48.6b, which is 60% of the total in 2021.

Reeves Yan, Executive Director, Head of Capital Markets, CBRE Hong Kong said investment demand softened in the third quarter driven mainly by the commencement of an interest upcycle. 

“Despite the continuous interest of property funds, local investors have become increasingly cautious. While the resumption of international travel will improve business sentiment and economic growth prospects for Hong Kong, the prolonged closure of the Mainland China border and the depreciation of the RMB against the USD/HKD are set to create barriers for demand recovery from Chinese investors. Investment volume will likely remain broadly low in Q4 2022,” Yan said. 

“Should travel with Mainland China resume next year, investment momentum is expected to have a noticeable recovery in 2023,” he added.

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CBRE noted that major banks in Hong Kong raised their Best Lending Rate by 12.5 basis points (bps) towards the end of the quarter in response to the US Federal Reserve’s fifth rate hike this year. It added that the Hong Kong Monetary Authority lowered the interest rate stress-test requirement from 300 bps to 200 bps for all property mortgages.

The $7b sale of a Grade A office building at 17 Kai Cheung Road is the largest commercial transaction year-to-date, accounting for 39% of the total volume during the third quarter. 

The property fund deployed during the period is also the highest quarterly total year-to-date at $8.7b but only involves seven transactions, the majority of which were in the industrial and hotel sectors.