According to the Hong Kong Monthly Report released by Knight Frank, during May 2014, the Grade-A office leasing market on Hong Kong Island remained stable. In the residential sector, sales volume rebounded further. While, retail sales continued to decrease in April year on year.
Prime Office
The Grade-A office leasing market on Hong Kong Island remained stable in May. Tenants are opting to renew their leases rather than relocate due to the scarcity of office space. Office rents in Kowloon East further softened, due to increasing supply and the decreasing affordability of tenants amidst previous rental surges.
David Ji, Head of Research & Consultancy, Greater China at Knight Frank, believes the availability of more large-floor plate office space in Kwun Tong will lead to an increase in new letting activity. The office leasing market in Kowloon East will therefore become more active, even though rents could experience a mild drop of 5% in the coming 12 months. Whilst, David expects office rents on Hong Kong Island to stand firm as supply remains tight.
Residential
In the residential sector, sales volume rebounded further in May, as developers continued to launch primary projects with sweeteners and landlords of secondary flats became more flexible during price negotiation.
David Ji expects the relaxation of the Double Stamp Duty in mid-May to boost both home-buying sentiment and transaction volume in the coming months.
Retail
Retail sales continued to decrease in April, year on year, and the expansion of international brands further slowed. Recently, the market has been dominated by mid-end retailers. Strata-titled sales of subdivided shops and en-bloc sales of shopping centres have become the focus of individual investors.
Looking ahead, David Ji believes rents of prime street shops have peaked and a rent-adjustment cycle is underway, while rents at prime shopping centres will remain stable with mild increases upon lease renewal.