Subdivided shopping malls – supply meets the demand?

February 5, 2013 / By

Recently, the property investment market in Hong Kong has seen several high net worth individual investors subdividing multi-storey shopping malls or large shops into hundreds of smaller shops for sale, with sizes ranging from 50-100 sq ft (gross). The average unit price of some of these projects, which are normally located in either traditional core shopping areas or on the high streets of decentralised areas, can reach around HKD 40,000-60,000 per sq ft (gross) for non-ground floor shops and over HKD 100,000 per sq ft (gross) for ground floor shops.

Thus far, the market has reacted positively to this product. The petite shops on offer in these subdivided malls have generally sold within a week of being launched with a number of profitable confirmor sales (sub-sales) already being recorded in the secondary market. In some projects, it has been reported that more than 70% of the purchasers are experienced speculators from the residential property market.

In fact, the concept of sub-dividing a shopping mall into numerous tiny shops is not new to Hong Kong. In the run-up to 2007 market peak, we saw similar strata-title sales in the market. The current trend, however, seems to be driven by different underlying fundamentals. Previously, investor sentiment in retail property was buoyed by higher growth expectations for tourist arrivals as well as a booming real economy. However, the latest round can simply be explained by low interest rates and restrictive policies in the residential sector pushing investment into commercial property.

I am convinced that the investment market will see more supply of these small shops in subdivided shopping malls and that prices can be sustained since there is not likely to be any change in this artificially low interest rate environment or removal of those residential austerity measures in near future.


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