Office space could become preferred real estate investment option in Macau

The Head of Leasing at JLL Macau, Oliver Tong, stated last week that investment in office space in Macau could become the best choice for investors as yields outperformed other real estate markets in the city.  

“With the extremely limited new office supply, the performance of office rentals and yield stood out from other property sectors. As price levels of office properties have lowered when compared with the highs in the past, it may potentially become investors’ preferred investment option once again,” Mr. Tong noted at the company’s real estate mid-year review.

While the number of new company incorporations registered in Macau went up 10.6 per cent to 2,856 in the first five months of this year, in the past five years only about 5,571 square meters of gross floor area in office space was added to the market.

The inadequate supply led to an overall office vacancy rate of 7 per cent in the first half of the year, with rental values for the overall office market going up 3.1 per cent, and the yields for the overall office market and Grade A office space growing between 2.8 per cent and 3.1 per cent.

Still, only 77 office transactions were recorded between January and June of this year, a 54.4 per cent year-on-year drop, with Mr.Tong citing higher yields in other cities and government sale restrictions as to blame for the low number of transactions

“When comparing to first-tier cities such as Hong Kong our yield is much lower. The other factors would be regulations or so-called restrictions implemented by the government some years ago back to 2012,” the JLL Macau Head of Leasing noted.

A special stamp duty on the transfer of real estate extended to commercial property, office space and parking lots in 2012, increased taxes imposed on vendors upon the on-selling of real estate within less than two years by charging 20 per cent on the sales price of transfers occurring within one year and 10 per cent within the second year.

“I think it’s the right timing for the government to review regulations implemented in 2012 […] That heavily impacts the liquidity issue. I’m not saying strictly to remove the restriction but I think it is time to review it,” Mr. Tong added.