Knight Frank launches the latest Hong Kong Monthly Report. The primary residential market is expected to remain robust, thanks to resilient local demand, the persistently low interest rate environment, and attractive discounts offered by developers. In the office market, office leasing momentum gathered pace as more tenants looked for better locations amid stabilized rent and an improving economy. In the retail market, given the uncertainties, coupled with the stagnant inbound tourism, most retailers are expected to be cautious and conservative about expanding. We expect overall retail rents to remain soft throughout 2022.
Grade-A Office
Hong Kong Island
Office leasing momentum gathered pace as more tenants looked for better locations amid stabilized rent and an improving economy. Therefore, some landlords started to firm up rents or reduce incentives. Rents in some of Central’s traditional Grade-A office buildings, picked up at a monthly growth rate of about 5%, supporting overall rental growth in Central.
Looking forward, the vacancy rate on Hong Kong Island, especially in the CBD, is expected to further improve amid strong leasing demand. We expect to see an uptick in rents in the coming months.
Kowloon
Affected by the festive season and the unstable epidemic situation, leasing activity in December slowed down. Most of the new letting cases were from small and medium enterprises for spaces 3,000 sq ft or below.
Given the location advantage and affordable rent, some tenants from Hong Kong Island considered relocating to Kowloon Central, especially Tsim Sha Tsui, supporting overall rents in Kowloon.
In the coming months, given the gradual economic recovery, we expect the Kowloon office leasing market to remain stable. However, business sentiment is expected to be temporarily affected by the fifth wave of the pandemic in Hong Kong.
Residential
Demand in the prime segment remained resilient. There were some major transactions of over HK$100 million during the month.
The second-hand market, in contrast, was quiet. Both homeowners and buyers adopted a wait-and-see-attitude at the end of the year. More homeowners put their sales plans on hold, while others offered wider room for price negotiation, leading to more enquiries and unit viewing from potential buyers.
Looking forward, thanks to resilient local demand, the persistently low interest rate environment, and attractive discounts offered by developers, the primary residential market is expected to remain robust.
However, the fifth wave of COVID-19 infections, involving the Omicron variant, may pose uncertainties and challenges to purchase sentiment in the residential market in the near term.
Retail
Hong Kong’s retail market was on the path to recovery before the outbreak of the fifth wave of the pandemic. However, the improving retail sales momentum may be dragged down again by the new coronavirus wave with the retightening anti-pandemic measures.
Under the government’s development plan announced in the 2021 Policy Address, the Northern Metropolis is planned to accommodate 2.5 million residents. Given the proposed population growth and the Northern Metropolis strategic location close to Shenzhen, the potential for retail property looks strong.
Looking ahead, Hong Kong’s stringent restrictions in the face of the fifth wave of the COVID-19 outbreak are expected to weigh on the local economy, including the retail sector. Given the uncertainties, coupled with the stagnant inbound tourism, most retailers are expected to be cautious and conservative about expanding. We expect overall retail rents to remain soft throughout 2022.