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HONG KONG, 15 December 2015 - Mainland China companies spent a combined HKD 18.35 billion on two office buildings in Hong Kong in November, setting new benchmarks for the local property market. JLL expects more mainland capital to make its way into the local property market in 2016.
Property investment activity saw no signs of abating in November, according to JLL's Hong Kong Property Market Monitor. In the largest transaction, Evergrande Real Estate acquired Mass Mutual Tower in Wanchai from Chinese Estates Holdings for HKD 12.5 billion. The unit price paid for the building reached HKD 36,187 per sq ft, setting a new record in terms of unit price for office buildings in the city. The previous record was for an office floor at 9 Queens's Road Central in Central, which sold for HKD 34,861 per sq ft in May this year.
On the same day as Evergrande Real Estate's acquisition, China Life Insurance bought the West Tower of One HarbourGate in Hunghom from Wheelock and Company for HKD 5.85 billion or HKD 14,885 per sq ft to serve as its headquarters in Hong Kong. This was the largest office transaction ever recorded in Kowloon.
Denis Ma, Head of Research at JLL, said: "The landmark transactions announced in November reflects the growing investor interest in the office sector we've seen in recent months. Given the potential for further Renminbi depreciation, we expect more mainland China companies to accelerate investment decisions over the next year. In addition to mainland China buyers, we are also aware of a number of insurance companies closely looking for potential opportunities in the market."
Based on preliminary data, capital values of prime offices grew 4.3% in 2015 and are expected to rise a further 0-5% in 2016, even as interest rates are set rise.
In office leasing market, the market recorded a net withdrawal of 27,200 sq ft in November, the first time net take-up had turned negative in a month this year. Subdued leasing activity and the return of several large tracks of vacated stock contributed to negative growth. In Central, net take-up amounted to 10,900 sq ft, returning to growth after a dip in October on the back of expansion and relocation requirements from smaller tenants. The vacancy rate in Central stayed at a low level of 1.2% at the end of November.
Meanwhile, a handful of sizable transactions from the manufacturing/sourcing and shipping/logistic sectors led the Kowloon East occupier market to grow by 25,100 sq ft.
Source: Research, JLL
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