Hong Kong Hotel Faces Price Drop Amidst Market Shifts

Ovolo Central Listed for Sale as Investor Sentiment Cools

A prime commercial property in Hong Kong’s Central district, the Ovolo Central Hotel, has been put on the market, reflecting a downturn in value since its 2021 purchase. The listing highlights the challenges facing high-end real estate in the region.

Property Details and Valuation

CBRE reports that the Ovolo Central Hotel, located at 2 Arbuthnot Road, encompasses approximately 26,202 square feet across 25 floors. Originally constructed as an office building in 1995, it was converted into a serviced residence in 2003 and later transformed into a boutique hotel in 2011. The property currently features 41 guest rooms, ranging in size from 355 to 710 square feet, alongside conference facilities and retail space on the lower levels.

The hotel is being offered for sale with options for leaseback or post-sale management. Its current market value is estimated at 315 million Hong Kong dollars (approximately 39.8 million USD), equating to 12,021 Hong Kong dollars per square foot. This represents a significant decrease from the 523 million Hong Kong dollars paid by the current owners in 2021.

Investor History and Market Trends

The property is held by investors identified as wealthy businessmen from India. In 2021, they acquired the entire building for 523 million Hong Kong dollars. The current valuation represents a 40% depreciation in value over the past four years, a loss of 208 million Hong Kong dollars. This decline mirrors broader trends in Hong Kong’s commercial property market, which has been impacted by economic headwinds and shifting investor confidence.

According to a recent report by the Hong Kong Rating and Valuation Department, commercial property prices in Central experienced a 15% decline in the first quarter of 2024, driven by increased interest rates and concerns about the global economic outlook. (Hong Kong RVD)

Previous Investments

These investors have a history of significant property acquisitions in Hong Kong. In 2010, they invested a total of 620 million Hong Kong dollars in three separate properties, including the Shiyuntai Hotel in Sham Shui Po (172 million Hong Kong dollars), serviced residences on Ho Lee Hok Road in Sheung Wan (298 million Hong Kong dollars), and a property on West Road (150 million Hong Kong dollars).

CBRE’s senior hotel department in Asia Pacific noted that the Ovolo Central is currently the only high-end, short-term rental property available for sale in Central. A recent comparable transaction involved the commercial building at 152 Queen’s Road Central, which sold for 1.08 billion Hong Kong dollars earlier this year.

The sale of the Ovolo Central Hotel will be closely watched as a bellwether for the future direction of Hong Kong’s luxury hotel market.