Hong Kong’s Commercial Real Estate Development

Hong Kong, a former British colony in South-Eastern China, is a vibrant, densely populated urban center with a major port and a global financial hub with a skyscraper studded skyline. In modern times, Hong Kong has turned itself in to an amazing city. It is clean, modern, busy and most of all efficient. Today, many of the Hong Kong based investors have invested on real estate in places like Hawaii and own major commercial real estate’s there.
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The real estate market of Hong Kong has many but limited similarities with the market in America, more specifically Hawaii. The investment sales of Hong Kong market are following the same downward trend as that of Hawaii, because of the global financial crisis that the world is prevailing upon. Since the cap rates are beginning to increase, the rents are expected to slacken off in the coming months. The similarity of the Hong Kong market with the American market ends there. The cap rates or the rate of return on the first year of ownership has gone up to 5% comparing to 3.5% last year. The borrowing rates are floating around 6%, and therefore commercial real estate investors are accepting negative leverage, which is very different from the Hawaiian real estate market. Even if there is a small glitch on the immediate market perspectives, but, with the strong Chinese economy by their side, the real estate market in Hong Kong has a strong future. The current discussion in the Hong Kong market is about the GDP being stagnant at 9% annual rate. Another question that has been floating around the market is, if China will loan 1 trillion dollars to the IMF or if they will use it to strengthen their position in the world economy.
In Hong Kong, they build skyscrapers faster than anyone, and there are a lot of projects under development and construction here. Even Las Vegas didn’t grow this fast. The site that was a harbor six months ago has turned into a construction site now. The landscape is fast changing which is the prime reason for the development of the real estate market in Hong Kong. The site adjacent to the JW Marriot, is being used as a construction site for another luxury hotel which will be up before the next summer. The railway system within the city is ultra clean, and the railway lines even go outside the city to Disneyland.
The retail of the railway stations is magnificent with modern glass and steel towers feeding the customers. The busiest railway stations contain the most successful retail projects with the all the brands in show. The size of the retail stores in Hong Kong are much smaller than what it is in America. But, they make up the lack of merchandise by the way they provide service. If, in any case, the store has not got the product you are looking for, they will deliver it to you within the night of the same day.
Following a stagnant market for the last 3-4 years, Hong Kong’s real estate market is attracting investors once again. With a healthy growing market, Hong Kong is turning to be a prospective business site for real estate companies in the future.