The commercial and industrial property market has remained subdued in recent years, with numerous disposals of recording losses. Until now, however, such transactions have primarily involved individual properties sold in smaller units. Link REIT has recently
put the entire T.O.P commercial building in Mong Kok on the market at a transaction price of HK$2.3 billion after a decade of ownership. A disposal at this price would crystallize a loss.
The building has an occupancy rate of 94.4% and generates HK$100 million in rental income, representing a rental yield of 4.3% at 
the transaction price. Its high occupancy rate and rental yield make the property valuation attractive to investors.
Link REITs continued focus on divesting properties with high occupancy rates and attractive yields reflects its bearish assessment of the building's capital value per square foot and rental prospects. The proposed disposal of T.O.P at HK$7,800 per square foot, implying a loss of 65%, or HK$3.6 billion, underscores that assessment. For investors who retain commercial property holdings but face mounting financial pressure, this transaction offers little reassurance. Commercial property prices per square foot, and rents appear highly unlikely to reach a trough and recover in the coming years. Against this backdrop, the number of financially strained investors seeking to dispose of their commercial properties is expected to increase over the coming year.
Link REIT has an established record of acquiring properties and enhancing their value through refurbishment and repositioning. This investment setback nevertheless highlights the extent of the decline in commercial property values. Despite its location next to Mong Kok MTR station and a post-renovation occupancy rate approaching 100%, T.O.P., the former Industry Department building, has not been appreciated over the past decade. Instead, the sale price implies a 65% decline in value. On this assessment, buyers who acquired commercial properties over the past ten years are now in debt.
