31 October 2018 (Hong Kong) – Knight Frank launches the latest Hong Kong Monthly Report. Supply shortage in the Hong Kong Island office market continues to limit the volume of leasing activity, despite increasing demand. In Kowloon, many office tenants were downsizing just as more co-working space operators entered the market. The residential price uptrend came to a halt after rising for 28 months, dropping 0.1% month on month (M-o-M) in August. In the retail market, luxury goods sales recorded the highest growth among the various categories, up 21.6% year on year (Y-o-Y) in August. Some luxury retailers were actively expanding their retail space in a few areas except Central.
Hong Kong Island
Inelastic supply in the Hong Kong Island office leasing market continues to limit transaction volume. Higher demand cannot translate into more leasing activity. Apart from space already preleased, there is basically no major new supply of premium office space planned island-wide for the next three years, the latest Policy Address offered few concrete measures to increase office supply either. So barring any major external shock, there is unlikely any downward movement in rents.
Most of the deals involved office space of 8,000 sq ft or below. The average leasing size was only about 3,900 sq ft, reflecting the downsizing trend amongst tenants. This came at the same time when more co-working space operators have entered Kowloon, not only offering flexibility but also bringing market structural change.
After rising for 28 months, the residential price topped out in August, dropping 0.1% M-o-M. Thanks to the attractive mortgage plans, prices in the primary market remained firm. In the secondary market however, some sellers cut their asking prices, while others left the market completely.
With the Sino-US trade war showing few signs of easing, some investors have decided to slow down their acquisitions. The US dollar, considered a low-risk asset, remained strong, while the renminbi (RMB) depreciated. David Ji, Director and Head of Research & Consultancy, Greater China, expects RMB depreciation may deter some active Mainland investors from entering the Hong Kong residential market in the short term.
Luxury goods sales recorded the highest growth among the various categories, up 21.6% Y-o-Y in August. Some luxury retailers were actively expanding their retail space in a few areas except Central.
Many retailers are incorporating new technology in their business to revolutionise shopping methods and explore new operating models to reduce lifecycle costs.
The high-speed rail will draw more same-day Mainland visitors to Hong Kong. As some of these new retail technologies are already well-established in the Mainland, Hong Kong retailers need to adapt to new technology more quickly to ensure their competitiveness.