Knight Frank launches the latest Hong Kong Monthly Report. In April, the take-up of Grade-A office space in Central notably improved, while Grade-A office sales were robust in decentralised business districts. The number of mass residential sales decreased in the past two months due to the introduction of new cooling measures, while the primary market continued to record encouraging sales results. Retail rents remained under pressure because of declining retail sales and visitor arrivals.
Grade-A Office
April saw a flurry of major leasing deals in the Grade-A office market, a few buildings in Central with abundant vacancy previously saw significant take-up from firms seeking large floor plates. Central vacancy rate dropped from 4.3% in March to 3.2% in April.
Another notable trend in the past few months has been the expansion of serviced offices. Many new business start-ups are opting for serviced offices over traditional spaces, as they offer more flexible rental terms. With small companies remaining one of the major drivers of office take-up, David Ji, Director, Head of Research & Consultancy, Greater China at Knight Frank, expects demand for affordable serviced offices to continue.
Residential
The number of mass residential sales transactions fell in the past two months, compared with the first two months of the year, due to the tightening mortgage measures launched by the Hong Kong Monetary Authority in February.
Meanwhile, the first-hand home sales market witnessed robust activity with several new projects having launched in April. Several developments were oversubscribed upon launch and cleared most of their available flats within short periods of time.
Despite the projected supply of private homes in Hong Kong rose to a record high of 78,000 units for the coming 3-4 years, David Ji believes the home prices will not be affected in the short term, as the new supply will take some time to materialise.
Retail
The total retail sales value continued to decrease in March, with the value of “jewellery, watches and clocks, and valuable gifts” recorded the largest decline. The sluggish performance was attributed to the decline in total visitor arrivals. The strong Hong Kong Dollar was a main reason why many visitors shifting to other destinations such as Seoul and Tokyo. Some negative publicity of tourist harassment did not help either.
Looking ahead, David Ji expects the retail sector to experience further downturn if the Chinese government’s proposal of a tariff cut on imported consumer goods materialises. Some retail landlords will be under pressure to review their asking rents. Prime street shop rents could decrease by 10-15% this year, while rents in prime malls to remain flat in 2015.