South China Morning Post -Developers turn to tap new market niches
Medium-sized players pin hopes on data centres, industrial facilities and self-storage warehouses to see out the city's worst recession on record
Property developers in Hong Kong, particularly medium-sized ones that rely on a narrow segment for their sales, are diversifying to new market niches to help them survive the city's worst recession on record.
Some of them are developing data centres, while others are expanding into industrial facilities and self-storage warehouses, according to Maggie Hu, an associate professor of finance and real estate at Chinese University.
Medium-sized developers were particularly vulnerable to the adverse impact of the business downturn, which gives them a bigger incentive to adapt than large, cash-rich companies.
"[They] are often much less diversified in their assets and types of income streams, [so] diversification is more important and imperative for them to navigate through the crisis," Hu said.
"Different types of property assets are affected by the pandemic in different ways. Self-storage facilities, industrial facilities and data centres have faced much smaller declines than malls, lodging, hotel and housing."
Hotels and shopping centres are bearing the brunt of Hong Kong's economic slump as the number of tourists began to dwindle last year following the street protests that rocked the city, and was further reduced by the Covid-19 pandemic that led to travel restrictions.
Falling retail sales caused rental charges to slip, forcing some luxury brands to shut outlets and drove Russell Street in Causeway Bay off the perch as the world's most expensive retail strip.
Far East Consortium, the biggest operator of three-star hotels in Hong Kong, is going into the business of providing private vaults for customers to store their valuables.
The operator of the Dorsett hotels in Wan Chai and Kwun Tong launched 4,500 safe deposit boxes in a 3,000 sq ft private vault at the basement of its Silka Far East Hotel in Tsuen Wan, converting space that previously hosted a foot massage parlour, and a bank vault.
Kowloon Development, a developer of tiny flats, recently moved into mass retailing with the 2,000 sq ft Soda Mall that features a supermarket and a grocery store for health foods.
"We see great potential in this segment [because] banks are downsizing their operations" offering safe deposit boxes, said Chris Hoong, managing director of Far East.
"Generally you have to wait six to seven years to get a safe deposit box, depending on the location."
Far East Vault's target customers were people living close to the hotel in Tsuen Wan, Hoong said, adding that in Hong Kong, small flats left little space for seldom-used valuable items.
"We have some space in the basement of our Silka hotel and we decided to use the space to put up a safe deposit box [business]," Hoong said.
"Depending on how this one goes, we'll need a year to observe before making a decision whether to start a new one."
The company is getting 20 inquiries a day. With the smallest box available for HK$218 a month, Far East expects the business to yield an income comparable to revenues from a small hotel with 100 rooms.
The model is responding to unmet need in the city, according to Lawrence Wan, a senior director of retail advisory and transaction services at CBRE Hong Kong.
"Demand for safe deposit boxes has always been present in Hong Kong, but sadly the supply has never been able to meet the demand," Wan said.
"Given the high-security and loading specification requirements, as well as the larger space required, specifically basement or ground-floor areas, suitable space for private vaults and safety deposit boxes is extremely limited."
By Cheryl Arcibal