Knight Frank today releases the Greater China 2016 second quarter (Q2) report which looks at the Grade-A office, luxury residential and prime retail property markets in Beijing, Guangzhou, Hong Kong, Shanghai and Taipei. Grade-A office markets in major Mainland cities remained robust with strong demand from finance, technology, consultancy and other sectors. In the residential market, prices continued to rise in first-tier cities on the Mainland. With brick-and-mortar stores facing increasing competition from online retailers, continued adjustments are expected in the retail market.
Grade-A Office
Abundant upcoming supply is expected to push up office vacancy rates in Beijing, Shanghai, Guangzhou and Taipei. In Hong Kong, leasing activity was slow on Hong Kong Island due to the low availability of space and weaker demand from the Mainland, while Kowloon East remained active, boosted by strong relocation demand from tenants on Hong Kong Island. Shenzhen-Hong Kong Stock Connect, which will potentially be launched in the second half of the year, is set to shore up the office letting market in Hong Kong.
Luxury Residential
In the short term, curbing measures are expected to remain in the Mainland’s first-tier cities, but luxury residential prices are set to rise further, propelled by high premiums in recent residential land transactions. The Hong Kong market remained polarised, with super-luxury homes popular with billionaires, but other homes recording price drops because of an anticipated increase in supply and a potential interest-rate rise.
Retail
In Q2, the Mainland retail market remained challenging, but rents were stable for prime retail space. Brick-and-mortar shops in major cities will remain under pressure with the slower economy and the increasing popularity of online shopping. In Hong Kong, with Mainland visitor numbers declining, along with their spending, both rents and prices of prime shops decreased significantly. The Hong Kong retail market is expected to bottom out early next year, underpinned by a slower decline in Mainland visitor numbers and retailer adaptation to changes in consumption patterns.