JLL: Converting Grade B and C Offices into Student Housing Offers Higher Potential Returns Than Hotels

According to Cynthia Chung, Senior Director of Research at the firm, the city faced a shortfall of roughly 76,300 student beds in the 2025/26 academic year. That figure is projected to climb by another 70,900 by 2029/30—a clear sign that supply is trailing far behind demand. As of the end of April, major student housing projects in Hong Kong offered around 6,900 rentable beds, with occupancy rates running between 98% and 100%. Rents have been climbing steadily by nearly 10% year on year since 2022.

Future supply, meanwhile, remains tight. Factoring in deals already closed for student housing conversions, applications under the "City-wide Student Housing Scheme", and potential government land sales in the current fiscal year, the pipeline stands at an estimated 16,300 beds as of end-April—far short of projected demand. That leaves considerable room for growth, with the sector well placed to evolve into a more established alternative real estate asset class.

Albert Chen, Head of Capital Markets at JLL Hong Kong, noted that early conversion activity centred largely on hotels. But as the hotel sector recovers and asset prices rise, the margin on such conversions has begun to narrow. In contrast, Grade B office buildings have posted vacancy rates above 10% for five consecutive years, while rents and capital values in the Grade B and C office segments have fallen 15.2% and 50.5% respectively from their 2019 peaks—making this an attractive entry point for investors.