1) PRC firms acquired North Point office tower from Henderson Land for USD1.27 billion

News

Henderson Land Development has agreed to sell 18 King Wah Road, a Grade A office building in North Point, for HKD9.95 billion (USD1.27 billion) to China Taiping Insurance and Shenzhen-based conglomerate China Create Capital, according to various sources. The recently completed 22 storey office building has a total GFA of 329,800 sq ft (30,639 sq m). Its price equates to about HKD30,170 (USD3,878) per sq ft, a record for an office building in North Point. The transaction was the third largest en-bloc office transaction in Hong Kong to date. (Source: SCMP, 5 January 2018)

Research View 

Hong Kong’s investment market had a robust year in 2017, with an investment volume totalling HKD423.3 billion (USD54.4 billion), representing an increase of 88% YOY. PRC investors have played a major role in Hong Kong’s investment market. According to Real Capital Analytics, PRC investors accounted for 28% of the total investment volume in Hong Kong. We expect PRC investors to stay active in 2018, especially in the office market. A rising confidence in economic growth, a persistently negative real interest rate, and continuous inflow of Chinese capital should support the property investment market in 2018, though there are external factors that could result in a tightening of local market liquidity.


2) Two remarkable industrial transactions, SUNeVision and Mapletree Logistics Trust

News

There have been two remarkable industrial transactions last week. To begin with, SUNeVision bought industrial land, Tsuen Wan Town Lot No. 428 on Ma Kok Street at a premium of HKD725.8 million (USD93.1 million). Based on a 9.5 plot ratio and site area 21,236 sq ft (1,973 sq m), the maximum GFA is about 201,543 sq ft (18,742 sq m), translating to HKD3,601 (USD462) per sq ft. According to SUNeVision’s announcement, the group is likely to develop a data centre to support their business growth. In another transaction, Mapletree Logistics Trust took full ownership of Shatin No.3, a strata-titled industrial building located at 22 On Sum Street in Shatin, by acquiring the remaining 38% in strata share value for a total consideration of HKD610 million (USD78 million). (Source: Lands Department and Mapletree Logistics, 8 January 2017)

Research View

We believe that the industrial property market in 2018 will primarily be driven by the potential industrial revitalisation scheme 2.0, a limited supply, and the robust demand for studios, offices and workshops by small-and-medium enterprises and startups. We expect that the increasing adoption of technology will boost demand for data centres which will further support demand for industrial space. Looking forward, we are optimistic about the industrial property investment market, and foresee the industrial prices to have the potential to increase by 5%- 10% in 2018.



3) Retail sector will end year on a positive note

News

The Census and Statistics Department reported accelerating retail sales in November, reflecting a notable growth of visitor arrivals and a strong consumer sentiment. The value of total retail sales in November 2017, provisionally estimated at HKD38.7 billion (USD 4.96 billion), increased by 7.5% YOY. In the first eleven months of 2017 together, retail sales value increased by 1.8% YOY. All retail subsectors increased in November year-on-year. The jewellery and watch sector was up 7.9%. Miscellaneous consumer durable goods surged 27.4%, while medicines and cosmetics sales also jumped 12.5%. Electrical goods and photographic equipment sales had a comeback, rising 9.8% compared to November last year. Food, alcoholic drinks and tobacco sales rose moderately by 3.8%. (Source: Census and Statistics Department, 3 January 2018)

Research View

The recovery of inbound tourism further confirms our expectation of a positive consumer sentiment as the November retail sales figures recorded the highest monthly YOY growth since February 2015. The holiday season has brought in strong sales while major shopping malls have reported strong growth in both foot traffic and sales. The outstanding result of 27.4% increase of miscellaneous consumer durable goods which can partially be explained by the iPhone X release and Xiaomi renting its first street level shop on one of Mong Kok’s prime streets indicates that business confidence of retailers is improving. Based on this upturn we expect retail sales to grow by 3-4% YOY in 2018.