The latest Colliers Weekly Snippet features James Lai of Office Services as he discusses what the expansion of cryptocurrency trading platforms could mean to Hong Kong SAR’s office leasing market. And in the investment market, Russell Lam of Capital Markets & Investment Services comments on the increase in investment activity as August heats up. Read on for the on-the-ground observations by our experts.
What does the rise of cryptocurrencies mean for the office market?
Hong Kong’s economy and business environment are renowned for supporting safe, regulated, and a structured flow of capital. Hong Kong as a platform has enabled major start-ups such as WeWork, Uber and Alibaba to expand aggressively, absorbing large amounts of office space in the process. WeWork has taken over 100,000 sq. ft., Uber took a floor in the Leighton Centre and Alibaba took 100,000 sq. ft. in Times Square.
The next round of start-ups on the agenda for Asia’s leading financial hub is cryptocurrency trading platforms. Huobi, Bitmex and Binance are looking to expand their footprint in Hong Kong due to the city’s ability to facilitate the free flow of capital worldwide. And leveraging the city as a platform, like WeWork and Uber, there is no doubt these cryptocurrency businesses will thrive as they have done in London, New York, and Tokyo.
Interestingly, the entry requirements to be a crypto platform is low, just like the creation of a crypto currency itself. It is also important to note that there are limited restrictions to trading cryptocurrency, and following in the footsteps of Bitcoin, it’s anticipated that this industry will grow quickly in Hong Kong. Plus, a lot of wealthy families and funds (e.g. GS) have started to explore, or have already launched crypto-related investments, making it an area to watch in the coming months from a general market perspective, but also for real estate owners and landlords.
Investment market driven by sentiment as fundamentals remain flat
Hong Kong real estate investment activities have heated up in August. There have been major transactions concluded for industrial assets with this sector demonstrating the most robust fundamentals in Q2.
In the past month, we have seen major industrial transactions total HK$4 billion, all of which were acquired by seasoned industrial players. For example, a state-owned logistics company acquired the East Asia Industrial Building for HK$2.24 billion, representing a unit rate of HK$4,802 per sq. ft. A Chinese enterprise bought the Mineron Centre for HK$695 million, representing a unit rate of HK$4,550 per sq. ft., and Hecny Group, a transportation/logistics company, acquired 1 Tai Yip Street in Kwun Tong for HK$628 million, representing a unit rate of HK$9,986 per sq. ft.
Further to the above, AEW Capital Partners acquired 50% equity interest in Minico Building at 18 Lee Chung Street from Hanison Construction for HK$305 million, representing a full acquisition value for the building for HK$610 million, or HK$6,337 per sq. ft. It was also reported that Goodman acquired 51% undivided shares of Hou Feng Industrial Building for a consideration of circa HK$200 million, which equates to around HK$2,000 per sq. ft.
Following the momentum from Q2 2021, we have seen an investment bull market develop due to positive sentiment as the fundamentals remain relatively flat.