Morgan Stanley Sees Greater Property Upside in Hong Kong Than New York

Morgan Stanley’s latest report says Hong Kong’s property market, particularly its office segment, has greater upside potential than New York’s in the months ahead. Improving rents and vacancy rates in Central may support stronger returns for Hong Kong landlords, the US bank said.

Higher rates have weighed on property markets in both Hong Kong and New York. However, Morgan Stanley sees greater upside potential in the Asian financial hub, especially in offices.

Two financial centres facing similar pressures

The report highlighted similarities between Hong Kong and New York, describing both as leading global financial centres. Hong Kong’s monetary policy moved in lockstep with the US Federal Reserve, while both cities faced limited land supply and expensive housing.

Office demand in both markets was also closely tied to the finance sector. Yet Morgan Stanley said the impact of higher interest rates was not the same in the two cities.

“Higher rates transmit differently into these two cities,” said a team of authors led by Praveen Choudhary, head of Hong Kong and India property research at Morgan Stanley.

The report’s investment preference reflects that distinction. “Scarcity matters more than rates. We prefer Hong Kong landlords over New York City office owners or Hong Kong developers,” the authors said.

Recovery focused on prime locations

The office cycle had turned in both cities after years of elevated vacancy rates following the Covid-19 pandemic, according to the report. Morgan Stanley added that the recovery was concentrated in the best locations.

That recovery pattern is important to the bank’s view of Hong Kong offices. With Central showing improving rents and vacancy rates, the report said conditions may support stronger returns for landlords in the area.

Morgan Stanley’s preference is therefore for Hong Kong landlords rather than New York City office owners or Hong Kong developers. The assessment places scarcity and location at the centre of the comparison, even as higher rates continue to affect both property markets.

Source: South China Morning Post