Savills Hong Kong leans on property management amid slump
SingTao · 1 SOURCESabout 3 hours ago4 MIN
Summary
Savills says its Hong Kong operation has weathered four decades of market shocks by pairing cyclical transaction income with steadier property management revenue. Greater China chief executive Raymond Lee says the current property downturn is the deepest and broadest in memory, yet falling valuations are also attracting foreign capital back to Hong Kong.
Key Points
- Savills has operated in Hong Kong for 40 years, and Lee said the firm has never needed to ask headquarters for funding even when market conditions deteriorated sharply
- Lee said property management now contributes more than half of company revenue, with more than 90% of its 15,000 staff deployed on frontline site-management work
- The company manages major infrastructure and border facilities including the Hong Kong-Zhuhai-Macao Bridge and Huanggang Port, underscoring the scale of its recurring-services business
- Lee said the present market adjustment is the deepest and widest he has experienced, with some properties losing more than 50% of their value
- He said at least 10 Singaporean and other overseas consortium transactions have been completed this year as investors moved in to buy discounted Hong Kong assets
- Lee said Singapore investors are being drawn by a strong Singapore dollar, borrowing costs of about 2% from DBS, and Hong Kong property yields of 4% to 5%. He said office rents in Hong Kong have already fallen to a certain level, but the sector is likely to remain under pressure until 2028, after which demand may exceed supply. He added that converting offices into student accommodation could generate yields of 5% to 6%, and said government support for education and healthcare could help nurture those sectors before lifting others
- On retail property, Lee said recovery is likely to come last because household disposable income is under strain. He described a typical two-income household earning about HK$50,000 a month, servicing a HK$5 million mortgage with monthly repayments of HK$25,000, and spending HK$8,000 a month on children, leaving only a little over HK$10,000 for other consumption. He said that helps explain the rise in cross-border spending in mainland China and the pressure on shops and malls, with a more normal recovery unlikely until after 2030. He also said that after severe asset-price declines since the pandemic, further falls should be limited
- Lee also highlighted Savills' June acquisition of real estate investment bank Eastdil Secured for US$1.1125 billion, or about HK$8.68 billion, after which it was renamed Eastdil Secured Savills. He described Eastdil as the "Goldman Sachs of real estate", saying the deal broadens Savills' access beyond local tycoons to top-tier global institutional investors. He said the group aims to bring in capital from the United States and Europe while also helping mainland Chinese companies expand into overseas markets
- As an example of current pricing, Lee cited the sale of Sheraton Hong Kong Tung Chung Hotel for HK$2.7 billion to a Malaysian consortium. He said the second-highest bid came from Hong Kong capital at HK$2.6 billion, only about 3% below the winning price. Although the sale price was well below the developer Shimao's bank borrowing of HK$4.5 billion, he said the lender had held the asset for more than two years and a yield of more than 4% at the transaction price was still reasonable
Why It Matters
For Hong Kong readers, Lee's comments point to a market where distress is still visible, but pricing has become attractive enough to pull in overseas money and support selected transactions. His emphasis on property management, office conversions and sector rotation also suggests where firms may look for steadier income while waiting for offices and retail to recover