Hong Kong Office Market Active With Several Transactions

According to a recent report from Knight Frank in July the Grade-A office sales market in Hong Kong was active, with a number of en-bloc transactions being recorded. Meanwhile, the office leasing market was also robust, particularly in Central. In the housing market, primary sales remained active, both in the mass and luxury sectors. However, the retail property leasing market remained subdued, with most transactions involving the relocation and expansion of mid-tier retailers.

The Hong Kong office sales market recorded a strong performance in July, with several large-scale, en-bloc transactions having been concluded during the month. These transactions indicate that investors and end-users remain optimistic about Hong Kong’s office property market in the long term. Office sales activity is expected to further improve and prices to continue edging up.

In the leasing market, sustained demand from Mainland Chinese companies continued to drive up office rents. Looking forward, David Ji, Director, Head of Research & Consultancy, Greater China at Knight Frank, believes sustained demand for office space and low vacancy rates will continue to drive up Grade-A office rents. Central’s Grade-A office rents is expected to rise more than 10 percent over 2015.

On the residential front primary luxury homes were well received and mass market new-home sales also performed well. The Transport and Housing Bureau announced that around 83,000 new private homes are projected to enter the market over the next 3-4 years, the highest level in almost 11 years. In the first half of 2015, 7,900 flats commenced construction, an increase of 58.0 percent from the second half of 2014. However, prices are expected to stay firm with demand anticipated to remain ample and interest rates to remain relatively low.

The luxury retailers have been making a lot of noise about retail rentals and the report shows that in the first half of 2015, Hong Kong’s retail industry suffered as store traffic and spending momentum among inbound visitors showed little signs of improvement.

Luxury retailers continued to suffer from drastic declines in sales. Retail sales of ‘jewellery, watches and clocks and valuable gifts’ in the first six months of 2015 fell 15.9 percent compared to the same period last year. To improve space productivity, global luxury brands and jewellery retailers are reportedly seeking reductions in rents for certain stores and considering closing unprofitable stores upon lease expiry.

In July, most leasing activity involved the relocation and expansion of mid-tier retailers. The healthy labour market conditions will continue to spur consumer confidence in mid-tier products, resulting in rent growth in non-core shopping malls in high-density residential areas.


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