According to the latest Greater China Property Market Yearly Review 2012 released by Knight Frank, the retail sector remained robust and outperformed in most major cities in 2012. This trend is likely to continue in 2013 and both retail prices and rents are set to be driven up by strong demand from international retailers and investors.
While tightening policies continued to be implemented on residential markets in Greater China in 2012, home prices in most cities continued to climb over the year. The trend is unlikely to reverse due to strong underlying demand. Home prices are set to remain stable or experience slight increments in Greater China during 2013.
Hong Kong
Hong Kong’s retail market outperformed in the past year. Retail sales continued to see positive growth in 2012. Home sales recorded a drop of 3.7% year on year over 2012, according to the Land Registry. Prices in mass residential sector in Hong Kong grew 23.6% over 2012, while luxury home prices grew 2.7%. The Grade-A office sales market continued to grow throughout the year.
Thomas Lam, Director and Head of Research, Greater China at Knight Frank, says “Hong Kong’s retail market will continue to perform well in 2013, with rents of prime retail premises to see a 10-15% growth, supported by robust visitor arrivals. Residential transaction volume will drop 10-15% in 2013, whereas home prices will remain stable with mild upward and downward movements of less than 5%. Based on sustained supply and demand, home rents are set to increase 10-15%.”
Thomas adds, with a slow economy, office leasing demand in core areas are expected to remain soft. Central Grade-A office rents are expected to decrease at most 5% in 2013, while rents in non-core districts could rise about 5%, with Kowloon East likely to see a 10-15% growth.
Beijing
In 2012, the demand for prime retail space in Beijing was strong and the total retail supply reached 907,000 sq m, the highest level in the past five years. From the second half of 2012, residential sales in Beijing rebounded due to strong demand from first-time homebuyers and upgraders. By the end of 2012, the vacancy rate of Grade-A offices in Beijing slightly dipped year on year to 3.8% and rentals increased 23.2% in 2012.
Thomas comments that amid steady growth in the economy, prime retail rents in Beijing will grow further in 2013. Due to strong demand from first-time homebuyers and upgraders, the transaction volume of primary homes will continue to go up in 2013. With limited Grade-A office supply in Beijing, the vacancy rate is set to remain low and rents will stay at relative high levels in 2013.
Shanghai
The retail real estate investment market was active in 2012 and prime retail rents in Shanghai continued to increase. The luxury residential sales market in Shanghai remained active, with increases in both transaction volume and sales prices over 2012. In the office market, with an increasing number of multinational corporations seeking to establish a presence in Shanghai, there was increased pressure on many firms to relocate to non-CBD area due to rising rents in 2012.
Thomas says that, the Shanghai retail market will see an increase in large-scale transactions. In the prime retail market, rents will continue with their upward trend with a year-on-year growth of about 10-12% in 2013. Due to the growing number of expatriates entering Shanghai, luxury residential rents are set to remain stable in 2013. Shanghai’s office rents are set to decrease amid abundant supply.
Guangzhou
In 2013, most new shopping malls in Guangzhou will be located in non-traditional business districts, which will attract foot flow from traditional central districts and suppress the growth of rentals in core areas. Housing prices in Guangzhou are expected to see gradual rises. Meanwhile, Grade-A office rents are expected to see limited upward movement due to the increase in the supply and stock of prime office space.