Two months after takeover, Hong Kong market 'largely unsettled.' (real estate market)(Industry Overview)

Two months after its takeover by China, the Hong Kong real estate market remains largely unsettled, with office rents rising, sales activity slowing, and residential prices leveling off. That's the assessment of Kennedy-Wilson International, one of the largest U.S.-based real estate firms operating in the former British Colony.

In an analysis of market trends and real estate activity during the first 60 days following the handover, Kennedy-Wilson's Hong Kong subsidiary, Kennedy Goldman, reported a significant upturn in one sector of the commercial marketplace. Office rents have increased between 5 to 10 percent, which according to Kennedy Wilson's Commercial Group President Richard Mandel, reflects a "high degree of optimism with respect to future business opportunities" in Hong Kong.

"There's also several new developments in the works which will significantly increase office supply in the coming years," he added. "That's very important, since Hong Kong is attracting a growing number of new businesses and hopes to become the central hub of commerce for all of China in the coming years."

While office rents are rising, office sales, a popular transaction in Asia, have leveled off, with few purchases taking place during the past two months. This flattening of the sales market, said Mandel, may be due to the fever pitch of such activity preceding the handover. He said that prices had been rising steadily over the past few quarters and the government took steps to halt the upsurge.

Despite the slowdown, Kennedy Goldman recently sold 4,829 square feet of space in the Bank of America Tower, a prominent Hong Kong office building, to Shanghai-based Orient National Group for approximately $2,000 per square foot (a total of ilK $71,710,650). The sale was one of the biggest of its type since the takeover.

In the residential sector, Mandel noted that prices, which had skyrocketed to record levels, have dipped 5 to 10 percent during the past 60 days due primarily to government efforts to dampen speculative investment.

"This is an example of the new government sensing that the residential market was overheating," asserted Mandel, "and effectively cooling it off."

Founded in 1977, Kennedy-Wilson International provides real estate marketing and investment services worldwide through its offices in Los Angeles, New York, San Francisco, Tokyo, Hong Kong and Jakarta.