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At least 100 buildings in Hong Kong in danger of depreciating value: JLL

These buildings need significant upgrading to remain relevant and attractive to their tenants.

Around 100 buildings in Hong Kong need to undergo upgrading to remain relevant or risk losing value in the market, property consultancy firm JLL said.

The firm said that given that more than 50% of Grade A and Grade B office buildings in Hong Kong were built more than 20 years ago and there will be significant new office supply coming into the market, it believes at least 100 buildings need to implement asset enhancement strategy to retain the asset values.

“Without asset enhancement, offices, shopping malls, hotels, residential buildings and industrial facilities will lose relevance due to evolving end-user habits and preferences,” JLL said.

JLL’s research reveals that rental rates for aged and outdated buildings are between 10% to 40% lower than up-to-date, well-managed properties in similar locations. This marked difference in rates may also increase as newer post-pandemic designed buildings.

Furthermore, in older buildings’, energy and maintenance systems are often less efficient, leading to increased operating costs, making a strong case for investors and landlords to reconsider design and asset enhancement strategies for aging properties.

“With COVID-19 changing market dynamics and tenant expectations, many existing buildings no longer yield the same value as before the pandemic. To stay relevant, attract tenants and meet their evolving demands, landlords and investors alike are increasingly aware of the need to enhance their built assets, ranging from design improvements to extensive upgrades, and even repositioning or repurposing the entire property,” Andrew Macpherson, head of asset development at JLL Asia Pacific said.

JLL said that the situation is similar in Asia Pacific as half of investment properties in prime locations are over 20 years old. It leads the real estate firm to forecast that there is over US$40 billion worth of unrealised value in aging and underperforming properties regionally.
 

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