100 HK Office Bldgs Need To Undergo Major Renovation
HONG KONG – At least 100 office developments in the Chinese territory need substantial upgrades to be able to compete with upcoming office buildings with better specifications, according to an analysis by JLL that was published by the South China Morning Post (SCMP) on noon Tuesday (2 March, SGT).
In a report authored by Andrew Macpherson, JLL’s Executive Director & Head of asset development for Asia Pacific, he pointed out that a large supply of office space is expected to enter Hong Kong in the next 3 years.
“These new buildings are being designed to much higher levels of performance in terms of technology, sustainability and wellness, including contactless entry, vertical transport and washroom facilities together with improved indoor air quality and cleaning regimes. They will also provide significantly improved amenities such as flex spaces, event spaces, green areas and restaurants, all of which will attract tenants from older buildings.”
As such, ageing office developments that fail to meet the expectations and post-COVID-19 requirements of businesses would become less appealing. And in turn, this would negatively impact the rents and capital values of older commercial properties that don’t undergo upgrades.
“Indeed, we have already started to see a flight to quality from both occupiers and investors. As a result, in the short to medium term we expect to see a divergence in asset values between premium buildings that do meet occupiers’ changed needs, and the rest of the market.”
As over 50 percent of Grade A & Grade B office properties in the Chinese territory were constructed more than 2 decades ago, JLL estimates that at least 100 office blocks need to undergo significant revamps to remain relevant and appealing to occupants.
Macpherson also added that sunrise industries in the fields of technology, pharmaceuticals, wellness, and sustainability that do business with Chinese companies are expected to occupy more office space in Hong Kong. However, they have different leasing needs as compared with lessees from traditional industries.
Meanwhile, SCMP reported on Tuesday morning that the Chinese territory could witness more “tokenisation” in property deals, as Hong Kong adopts financial technology which will allow a larger pool of investors to acquire and trade illiquid and pricey assets.
Multinational law firm DLA Piper’s Head of Asia Pacific property, Susheela Rivers, revealed that its clients from the real estate development industry are considering tokenising illiquid assets like properties as a way to raise funds. And the trend is expected to start this year.
Rivers pointed out that Hong Kong’s expensive property market has a high point of entry, so many investors can’t afford to access the market. But by tokenisation, or using digital tokens, illiquid properties can be more tradeable
For instance, ownership of an office block worth HK$100 million (US$12.9 million) can be divided into 100,000 tokens valued at HK$1,000 apiece, enabling small-time investors to join in the action.
Furthermore, this increases liquidity as tokens can be easily traded on an exchange or a secondary marketplace as it’s powered by blockchain technology. Some tokens may also provide dividends to investors, added Rivers.