Bank of China (Hong Kong) won a HK$1 billion ($128 million) loan mandate to convert the Regal Oriental Hotel into student apartments, beating out Industrial Bank’s Hong Kong branch and other lenders. Centaline Investment, the borrower, confirmed it received strong interest from multiple banks. The deal reflects a broader shift among Hong Kong lenders, who have largely avoided commercial real estate in recent years but now see student housing as a safe bet. Colliers counted 25 such conversion projects worth HK$10.7 billion from 2024 through mid-2025, compared with only a handful before that period.
Student housing conversions generate yields around 5 percent, supported by rising demand from mainland Chinese students and government policies expanding non-local enrollment caps. Hong Kong approved more than 94,500 student visas and entry permits last year, more than double the 2022 figure, with most coming from mainland China. Jones Lang LaSalle predicts a shortfall of 147,200 student beds by 2029. Banks are now financing even office-to-residential conversions, which carry higher risk and have not yet produced a successful operating example in the city. HSBC secured a loan this month for Wee Hur Holdings to convert the One Bedford Place office tower in Kowloon into 500 student beds, contingent on regulatory approval.
Lenders across the region—including local, Chinese, Singaporean, and international banks—are competing aggressively for these deals, sometimes approaching borrowers with unsolicited term sheets as soon as projects become public. Loan volumes in Asia Pacific excluding Japan fell to a 16-year low in the first half of this year, pushing banks to hunt for new deployment opportunities. Some bankers remain cautious, particularly on office conversions, and are seeking recourse clauses that allow seizure of personal assets if defaults exceed collateral value. Still, most lenders view student housing as both a real estate and operational business play, with steady income and manageable risk.
Office-to-dorm conversions now represent roughly 30 percent of deals under consideration at Centaline Investment, up from a negligible share previously. Early hotel conversions, such as the Y83 hostel in Hung Hom and Sunny House, required lenders to conduct site visits and interview tenants before approving loans, reflecting initial market skepticism. Savills expects the gap between hotel and office conversion financing to close within 12 to 18 months as more projects come online. Tighter US visa restrictions and geopolitical tensions continue to drive Chinese students to Hong Kong universities, sustaining demand even as developers acknowledge a real probability of oversupply in the next few years.
