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News from Knight Frank Hong Kong

Knight Frank launches Global Capital Markets Q1 2015 report

03 February 2015

Knight Frank releases its Global Capital Markets Q1 2015 report.  According to the report, office space in Hong Kong is more than twice as expensive as prime commercial property in any other 31 global cities tracked. 

As part of its 2015 outlook for global commercial property, Knight Frank analysed capital values for prime offices in 32 cities, which showed that prime Hong Kong office space is valued at US$70,000 per sq m.  This is about 2.5 times more than second-placed Singapore at US$28,340 per sq m and more than three times as much as that of the City of London.  
 
Darren Yates, Head of Global Capital Markets Research at Knight Frank, says, “The availability of land and land values are the fundamental issues that are driving rents and capital values in Hong Kong and Singapore, in particular.  These locations have a very constrained supply of land, combined with high population densities and an abundance of successful global companies with an ability to pay higher rents.”
 
Despite strong recent growth in capital values and an uneven global recovery, Knight Frank is forecasting further growth in cross-border investment in 2015, as investors seek better returns and diversification outside home markets.   
 
Based on Knight Frank’s forecasts, global investment volumes for commercial property will rise by at least 10% to over US$700bn in 2015, given the significant weight of capital targeting real estate.  Finalised data for 2014 is expected to show that global investment volumes for commercial property exceeded US$600bn, around 15% up on 2013.
 
Key forecasts for 2015:
 
• New wave of Chinese investment from Ultra High Net Worth Individuals (UHNWIs), small to mid-cap state-owned enterprises and private developers. 2015 is expected to be a year for insurance firms 
• Large-scale Japanese Pension Funds will diversify into global real estate 
• Improving tenant demand for offices and falling availability will lead to rental growth
• Specialist property will continue to attract investors and become increasingly mainstream
 
Darren adds, “Real estate capital markets have been increasingly buoyant and disconnected from occupational trends, which in turn have mirrored the unevenness of the global recovery.  Investor focus thus far has been on transparency and liquidity, which has played well to the gateway cities such as London, Paris and New York. But demand is increasing for second and third tier cities where competition for stock is less intense and potential returns are higher.”  
 
Nicholas Holt, Head of Research for Asia-Pacific at Knight Frank, says, “Within the Asia-Pacific region, we expect to see an increase in investment volumes in 2015 with a huge weight of capital still chasing limited stock. Japan and Australia will very much lead the way, followed by China, Korea, Hong Kong and Singapore. With pricing extremely high for prime assets in many of the markets, there could be a renewed focus on more secondary locations and value-add opportunities.”