Knight Frank launches the latest Hong Kong Monthly Report. The Kowloon office market saw robust negotiation activity involving large floor areas. Meanwhile, residential home sales jumped month on month in March, with the return of both sellers and buyers. In the retail market, there were a number of major leasing transactions with notable rental cuts.
Grade-A Office
Office availability remained very tight in core business districts on Hong Kong Island. Landlords remained aggressive, offering little room for rental negotiation, thus further pushing rental levels upwards. A number of multinational corporations and professional services firms traditionally located in Central were relocating to non-core areas to reduce costs. David Ji, Director, Head of Research & Consultancy, Greater China, expects the tenant mix in Central to continue to change, with more Mainland firms taking up the space vacated by Western firms.
In March, there were not many major leasing transactions in Kowloon, but interest remained strong. With its availability of large floor space, Kowloon East has become popular for companies looking to consolidate their business operations in a single location.
Residential
Despite another interest-rate rise in the US, residential sales rose another 44% month on month in March 2017. An abundance of new flats was launched during the month, with developers offering various sweeteners to boost sales. Although the secondary market remained relatively quiet, a number of record-breaking deals were recorded, resulting in further growth in home prices.
The government’s announcement in April of a 15% stamp duty levy on first-time homebuyers purchasing multiple flats in one go is not expected to drag down home prices, as these transactions make up less than 5% of total sales. While abundant supply and interest-rate rises will help suppress price growth, high land prices and strong housing demand will lend support to home prices, which are expected to rise a mild 5% in 2017.
Retail
In February 2017, the retail sales of the “jewellery, watches and clocks and valuable gifts” category rose 2.5% year on year, the second increase for this category in the past 12 months. Visitor arrivals during the first two months of the year rose 1.4%, with Mainland visitor numbers gaining 1.1%. These figures suggest that the market has continued to improve and evolve. Both landlords and tenants have been adjusting their leasing strategies during this period of consolidation. David Ji expects that a new rental benchmark for retail premises will be set in the coming few months before the market enters a stabilised period during the second half of the year.