Knight Frank launches the latest Hong Kong Monthly Report. In the office market, as the current rent level in CBD is on par with that in the post-global financial crisis in 2010, the trend of “recentralisation” has been more obvious, amid a surge in demand for prime office buildings. In September, the residential market continued to perform steadily. Demand from local buyers remained resilient. The rapid development of e-commerce has led to a new retail landscape in Hong Kong. Some online brands that have developed to a certain scale want to set up physical stores as an additional sales channel to expand their customer base and provide experience-based services to their existing customers.
Grade-A Office
Hong Kong Island
As the current rent level in CBD is on par with that in the post-global financial crisis in 2010, the trend of “recentralisation” has been more obvious, amid a surge in demand for prime office buildings.
Given the improved business sentiment, some tenants, especially in the financial services sector, previously located in non-CBD areas, are looking to maintain a presence in Central.
As Central’s rental premium over the rest of the market has narrowed, more tenants are interested in upgrading their office environment and relocating to prime locations in the CBD. We expect leasing momentum in Central to remain upbeat, beginning an upward rental trend in the district.
Kowloon
Leasing activity for Kowloon Grade-A offices maintained a stable trend in September, with most of the deals in Kowloon East at HK$22 per sq ft or below.
Some tenants continued to pursue office space optimization amid stabilized rent, while some tenants seized the opportunity to relocate their offices from Hong Kong Island to the other Grade-A office buildings with larger floor plates in Kowloon at more affordable rents.
Stepping into the last quarter of 2021, the signal of bottoming-out is more visible in the leasing market. We expect both rents and leasing sentiment in the overall Kowloon market to remain fairly stable in the near term.
Residential
In September, the residential market continued to perform steadily. Demand from local buyers remained resilient.
However, transaction activity in the luxury market slowed down, with fewer enquiries and flat inspections during the month. Uncertainty in the local stock market and some negative economic factors in the Chinese Mainland curbed sentiment among potential buyers, leading to a wait-and-see attitude.
As home prices are fluctuating around their historical high, and up to 10,000 new units could be launched in the next one to two quarters, some homebuyers will hold out for better options.
Retail
Consumption sentiment in Hong Kong continued to improve amid the stabilising COVID-19 situation and the launch of the consumption voucher scheme.
The recovering retail market was also partly supported by the improved labour market. The seasonally adjusted unemployment rate slipped to 4.7% in the June-August quarter, the lowest since the January-March period in 2020.
Online retail sales continued to soar. For the first eight months of 2021, the value of online retail sales value increased by 45.2% YoY. The rapid development of e-commerce has led to a new retail landscape in Hong Kong. Some online brands that have developed to a certain scale want to set up physical stores as an additional sales channel to expand their customer base and provide experience-based services to their existing customers.
Nevertheless, the outlook for Hong Kong’s retail market is expected to remain highly challenging in the short term. Uncertainty in the local stock market could weigh on consumption sentiment, but some positive fundamental factors, including an improving labour market and economic performance, will be tailwinds. The extent of the stimulus effect of the consumption vouchers is still uncertain, but they are expected to underpin retail sales and restaurant receipts at least in the short term.