Distressed property deals to rise this year as slump forces landlords, receivers to cut prices

High interest rates and uncertainties in the global economy are cited as reasons why distressed deals will rise in 2025

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A man walked through Kai Tak with construction in the background. Photo: Nora Tam

Published: 8:30am, 14 Jan 2025Updated: 8:53am, 14 Jan 2025

Hong Kong is likely to see more distressed commercial properties snapped up by investors this year compared with 2024, as landlords and receivers have become more willing to slash their asking prices.

“With interest rates remaining high and the uncertainties in the global economy, the number of distressed properties is expected to keep increasing this year,” said Eunice Tang, executive director of capital markets at JLL. “We are seeing more end users and investors showing interest in the investment market since the second half of last year, as receivers are more willing to cut asking prices.”

In 2024, the cumulative value of distressed property transactions in Hong Kong hit HK$15 billion (US$1.9 billion), Tang said. In 2012, the value of such transactions peaked at HK$82.7 billion.

In the last three months of 2024, investors were focused on assets that were under receivership or being sold at a loss, accounting for nearly half of the big ticket transactions in Hong Kong, according to data tracked by Colliers. The trend is likely to continue this year, it said.

“Many landlords won’t explicitly state they’re willing to sell, but they are likely to consider solid offers from purchasers,” Tang said. “While the value of distressed property sales is unlikely to reach record highs, the number of transactions might increase.”

Buyers are also “capitalising on the current price downturn to make purchases”, she said. For example, Hong Kong Metropolitan University paid HK$2.65 billion for One HarbourGate East Tower, a premium office building in Hung Hom formerly owned by cash-strapped Chinese tycoon Chen Hongtian. And in December, state-owned China Resources Land bought five retail podiums – the lower floors of commercial buildings that house retail shops – from the Hong Kong Housing Society for HK$1.04 billion.

Another property that has been put on the market is the 1,219-room Sheraton Hotel in Tung Chung. The asset is made up of two hotel brands: the Sheraton Hong Kong Tung Chung Hotel with 218 rooms and the Four Points by Sheraton, which has 1,001 rooms, according to Savills, its sole agent. Sources told the Post the asking price for the entire asset was around HK$4.5 billion. The property is close to Hong Kong International Airport and has a gross floor area of about 610,000 sq ft.