Office investment volume balloons 408% to $53b in Q4

Total spending by Mainland investors hit $24.9b as they aggresively snapped up office deals.

As investors from the Mainland aggressively snapped up high-value office spaces even with the year coming to a close, office investment volume ballooned 408% QoQ to $53b in Q4 which represents a figure over five times higher than the 10-year quarterly average of $7.8b, according to Colliers International quarterly office report.

PRC investors remained the main drivers of office leasing activity after spending $24.9b which accounts for almost half (47%) of total office transactions in Q4.

For instance, mainland investors accounted for approximately 55% of the $40.2b acquisition of posh Central office building The Center whilst the $9b acquisition of 8 Bay East in Kwun Tong similarly involved Mainland developer LVGEM.

The strata title office market was also abuzz with year-end activity as a growing number of tenants aimed to purchase owner-occupation purpose with the market maintaining its steady momentum since the sale of the Murray Road Car Park office site in Central.

Amidst strong investment demand, overall Grade-A office prices rose 15% in 2017. Central rates are still the most expensive as it rose 10% further but up-and-coming districts Wan Chai, Tsim Sha Tsui and Kowloon East may be giving Central a run for its money as rents rose 20% across all three districts from a year ago.

Moving forward, Colliers analyst Zac Tang expects that the office market will remain the most popular property sector as its investor survey report indicated high investor interest in en-bloc and strata-title office investments.

“We expect office price to increase about 5% in 2018, moving similarly to the growth of office rents. Office yield will stay flat based on this price prediction. In 2017, some investors have already shifted their focus to lower Grade commercial buildings as Grade A offices have become too expensive. We expect this trend to remain in 2018 amid the very low property yield,” added Tang.

Photo from Michal Osmenda from Brussels, Belgium - Panorama of Hong Kong Central from Victoria Peak, CC BY 2.0

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