Hong Kong investors are turning run-down factories and warehouses into offices to fill a space shortage in the city with the world's second-highest rents.
Pamfleet Group and Gaw Capital Partners are among real estate funds that bought more than HK$54 billion of the city's industrial properties in the year ended June 30, according to data compiled by Centaline Property Agency. That is the highest for any 12-month period on record, the company's data shows.
Redevelopment of vacant industrial spaces has accelerated since 2009 as investors lured by surging office rents seek to exploit the gap between the cost of acquiring the buildings and the potential return from converting them for use by banks, insurers and other business tenants.
The government has implemented policy changes since the 1980s to encourage the transformation of unused properties after manufacturing shifted to cheaper locations in the mainland and Southeast Asia.
"It's been a slow start, but things have picked up over the past few years," said Simon Lo, Hong Kong-based head of Asia research at property broker Colliers International. "Buyers are coming in with the expectation their returns will go up multiple times because of the redevelopment potential."
Demand for offices has been swelling as Hong Kong cemented its place as a regional financial hub over the past decade. Average prime office rents have risen 54 per cent to June from mid-2009, according to government figures. Average vaca...