Knight Frank launches the latest Hong Kong Monthly Report. Central’s Grade-A office market remained quiet last month, given the lack of available space. Home sales have seen a notable improvement, while retail sales value continued its downward trend.
Office
In August, the Grade-A office leasing market remained quiet on Hong Kong Island, limited by the lack of available space. Vacancy rates remained very low across main business districts.
In contrast, office leasing in Kowloon remained active, although expansion from insurance companies slowed down after the previous boom. With abundant upcoming supply, landlords are offering more rental discounts and incentives to attract and retain tenants.
With the Shenzhen-Hong Kong Stock Connect likely come into operation in December, David Ji, Director, Head of Research & Consultancy, Greater China, expects increasing office demand from Mainland financial institutions will provide further rental support in Central given the tight availability.
Residential
According to the Land Registry, residential sales in August edged up a notable 37% month on month, reaching 5,821 units. The rise was attributable to robust activity in the primary sales market. Home prices continued to increase, but they were still down 8% from their peak in September 2015.
A number of primary projects offering small flats had strong sales in August. David Ji expects developers to offer more small flats to meet market demand in the coming months. However, with the increase in supply of new homes and a potential US interest-rate hike, growth in home prices could remain suppressed.
Retail
Retail sales value continued to slide, though in a narrower range than in the preceding two months.
On the leasing front, some prime streets in core-retail districts saw the re-emergence of restaurants. Meanwhile, a number of banks and financial services companies renewed their leases in prime streets at discounted rents.
Looking ahead, there is unlikely to be a notable rebound in retail sales and street shop rents in the coming months, despite the rally in inbound tourism. The change in consumption patterns of Mainland tourists from luxury to affordable products will continue to suppress growth in retail sales value.