Hotel-to-student-dorm conversion yields up to 6%: CBRE
CBRE says converting hotels into student dormitories can yield returns of 5.5% to 6%. Hong Kong faces a shortage of over 50,000 beds, expected to reach 75,000 by 2030. The firm forecasts 2026 commercial property investment transactions to reach HK$53 billion, up 17% year-on-year.
Property consultancy CBRE said hotel-to-student-dormitory conversions could generate returns of 5.5 per cent to 6 per cent, with most buyers not operating the properties as hotels. Senior director for capital markets Bowie Pao noted that current hotel transaction prices do not exceed HK$10,000 per square foot.
Pao said the government's vision of making Hong Kong an education hub means the education sector, including schools and dormitories, offers stable income and long-term demand. Banks are more positive about financing student-dormitory conversion projects than other commercial properties, he added.
CBRE's executive director and head of Hong Kong research Michael Chan said the market lacks more than 50,000 dormitory beds, with the shortfall expected to widen to about 75,000 by 2030. Conversions of hotels and residential properties are expected to provide 9,000 to 9,500 beds over the next two years. Three government land sales for student dormitories will provide about 4,500 beds, still insufficient to fill the gap.
Grade A office leasing transactions reached 1.2 million square feet in the third quarter, down 6 per cent quarter-on-quarter. Chief operating officer for advisory services Venus Fung said demand mainly came from banking, insurance and other financial sectors. She said the government's tax incentives for key industries including finance are positive for office leasing but will take time to take effect.
CBRE forecasts Hong Kong's total commercial property investment transactions will reach HK$53 billion this year, up about 17 per cent year-on-year. Grade A office rents are expected to rise 7 per cent to 8 per cent for the full year, with Central seeing the biggest increase of at least 17 per cent, the largest since the pandemic. Retail rents are forecast to rise 3 per cent to 5 per cent, while industrial and logistics rents could fall 3 per cent to 5 per cent.
Chan noted that high US Treasury yields make a Federal Reserve rate hike likely, with Hong Kong banks possibly raising rates from late 2026 to early 2027.
