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Property News Weekly Digest
2020/11/14
〈Asian Post, Nov 14, 2020〉Demand for Hong Kong's prime office space is likely to fall as some of the city's biggest banks, including Standard Chartered and HSBC, are considering more flexible working arrangements after their success during the coronavirus pandemic, according to market observers.

Financial companies are some of the biggest commercial renters in Hong Kong, accounting for 73 per cent of the grade A office space in Central, according to third-quarter data from Knight Frank.

And vacancy rates are rising, likely to exceed 10 per cent in core areas of Hong Kong Island by the end of the year, according to Centaline Commercial.

Standard Chartered and HSBC rent about 440,000 sq ft of office space between them outside their own buildings in Hong Kong, according to market sources.

"While we have been thinking through the issues around future workplaces for some time, it's inevitable that recent events provided a catalyst," said Tanuj Kapilashrami, group head of human resources at Standard Chartered.

〈Business Post, Nov 13, 2020〉COVID-19 will likely impact the property market. Some of it might be cyclical and therefore temporary, while others might be structural and permanent, such as the accelerated shift to online retailing. This in turn lowers the demand for retail properties but would encourage retailers to increase capex on their logistics, delivery and storage capabilities.

What is interesting is that these structural changes are inter-related. A widespread adoption of working from home (WFH) could result in a preference for bigger apartments in the suburban/outlying areas and lower the demand for smaller apartments in the city centre and office property.

The office workspace will likely be impacted as new social distancing requirements in the office could potentially reverse the decades-long trend of densification, where offices absorb less space per employee.

Although it is possible for the working environment to return to status quo before the pandemic, we believe there are a few clear trends emerging in the office property sector.

First, more corporates will likely implement WFH arrangements for employees. Flexible WFH arrangements have benefits for employees, firms and even the environment due to lower levels of commuting and many workers have reported a preference for this flexibility.

〈China Daily, Nov 12, 2020〉Swire Properties, one of the largest owners of offices and shopping centres in Hong Kong, has sold a 21-storey office building to a consortium of investors led by Gaw Capital Partners for HK$9.85 billion, after its parent posted its first interim loss in half a century.

The listed property arm of Swire Pacific has sold Cityplaza One in Taikoo Shing to "realise cash from its investments", according to a filing with the stock exchange yesterday.

The price translates to HK$15,609 per square foot, 18 per cent lower than what Swire Properties fetched two years ago when it sold the neighbouring Cityplaza Three and Cityplaza Four towers.

"[It] is part of our ongoing business strategy to dispose of certain non-core assets, which will enable us to recycle capital and channel it to new projects in our core markets," a spokesman for Swire Properties said.

"We remain committed to Hong Kong and to our long-term investment strategy in our home market. We're confident in the long-term outlook for the Hong Kong office market."

Swire Properties reported interim core profit plunged 80 per cent to HK$3.75 billion, while parent Swire Pacific slipped into its first interim loss since 1974 as its Cathay Pacific Airways unit was weighed down by the travel slump as a result of the coronavirus pandemic.

〈The Standard, Nov 11, 2020〉Evergrande sends home buyers to outside lender, sparking speculation of cash-flow problems

China’s most indebted developer, China Evergrande, has touched off fresh speculation about its financial weakness by telling prospective clients not to seek mortgage loans from its designated lending arm, Profit Concept Finance Limited.

Home buyers interested in Evergrande’s new Emerald Bay development, in Tuen Mun, told Apple Daily that the developer has named a new agency, ORIX, to deal with their first mortgage loan applications from Nov. 16.

Prospective buyers told Apple Daily that they suspect debt-laden Evergrande may be running low on cash to lend as mortgages.

Sources familiar with the situation told Apple Daily that such a change of lender is a normal business decision that will not affect the buyers.

However, that view is not shared by Ivy Wong, the managing director of Centaline Mortgage Broker. She said such sudden changes of lenders is uncommon, and advised buyers to be cautious with the new arrangement and the potential risks.

〈Asian Post, Nov 10, 2020〉Homebuyers packed a real estate developer's showroom over the weekend to snap up hundreds of new flats, as assurances of low interest rates by monetary authorities drove them to seek sanctuary in fixed assets.

New World Development said it sold all 337 flats at Phase II of The Pavilia Farm project in Tai Wai in the New Territories, raising HK$3.4 billion within nine hours.

The weekend's haul puts New World on track to generate HK$10 billion in receipts from The Pavilia Farm, after three successful rounds of sales since its launch four weeks ago, a record for the developer in a down-market year.

"The Pavilia Farm is a mass market project that attracted a lot of registrations of intent," said Sammy Po, chief executive of the residential division at Midland Realty. "Many buyers were turned away" by the limited offers in each launch, he said.

New World raised yesterday's average price by 5 per cent to HK$19,800, compared with the first batch. With sizes from 264 sq ft to 753 sq ft, flats started from HK$5.73 million for the smallest units. Still, that did not deter buyers, who snapped up a third of the offerings within the first two hours, with a customer forking out HK$29 million for two three-bedroom units, according to the developer's sales and marketing director Akan Wong.