Knight Frank launches the latest Hong Kong Monthly Report. In the office market, the recentralisation trend became more evident in Hong Kong Island, while leasing activities in Kowloon have slowed down as festival season is approaching. The residential property market in Hong Kong cooled down and showed mixed performance in various segments. Hong Kong’s retail market continued to recover gradually; we expect the F&B sector to outperform in the retail market given the common dine-out habits of Hong Kong people.
Grade-A Office
Hong Kong Island
With the return in demand from office tenants in Central, the recentralization trend became more evident in October, leading to a decreasing vacancy rate and a continuous uptick in rental levels in Central. Overall rental rates in Central saw a quarterly increase of 4.2%, reaching HK$113.6 per sq ft. But leasing demand in the non-CBD area was relatively weak, and landlords were more flexible in lease negotiations. Co-working operators grabbed the opportunity to expand at reduced rents.
Kowloon
Leasing activities in Kowloon have slowed down as festival season is approaching, leading to a monthly drop of 20% in new letting transactions. Leasing activity was dominated by the sourcing and manufacturing sectors.
As bottoming-out signals continued, along with stabilizing rents, tenants generally took a wait-and-see approach towards their long-term real estate plans. They preferred to opt for lease renewals rather than relocation.
Residential
The residential property market in Hong Kong cooled down and showed mixed performance in various segments in October. According to the Land Registry, the total number of residential transactions saw a significant drop of 20.6% MoM and 6.2% YoY to 4,643. Despite the drop in transactions, purchasing momentum in the primary market persisted.
Top-of-the-line residential assets continued to draw strong interest from high net-worth individuals. Two units in Wheelock’s Mount Nicholson at The Peak were sold for a total of HK$1.2 billion to the same buyer. A 4,544 sq-ft unit was sold for a record-breaking HK$640 million or HK$140,845 per sq ft. The flat is touted to be Asia’s most expensive residence in terms of unit price.
Going forward, we expect transaction activity, especially in the first-hand market, to maintain its positive momentum as demand remains firm. We expect overall housing prices to increase 2–3% in Q4 2021 and overall transaction volume in 2021 to reach a nine-year new high.
Retail
Hong Kong’s retail market continued to recover gradually, although it still recorded a massive drop compared to the normal period in 2018.
The F&B sector saw a significant recovery compared to last year, owing to the relaxation of social distancing restrictions and the stable local epidemic situation. The value of total receipts of the restaurant sector in Q3 2021 soared by 43.8% YoY.
Since the pandemic, there has been an upsurge of F&B operators adopting the take-away business model, which involves cooperating with food delivery service providers, as well as running an online ordering platform on their own. As the city has largely resumed normal economic activity, and people have returned to their normal way of life, we expect the F&B sector to outperform in the retail market given the common dine-out habits of Hong Kong people.