Grade-A Office
Hong Kong Island
The Grade-A office market has been in the doldrums since June, as the impact of the social unrest and the Sino-US trade conflict continue to linger. Premium Central office space has been hit the hardest, with rents dropping by 11% in the past five months. In terms of industry, demand from retail companies has been particularly sluggish. Remarkably, despite less than promising environment some multinational financial institutions are still taking up spaces.
Kowloon
Leasing sentiment weakened in October given the uncertain outlook for both the local and global economy. More lease disposition cases were seen in Kowloon, indicating signs of softening demand. Leasing activity is expected to remain slow in the coming two to three months, especially since the traditional low season.
Residential
The relaxation of the mortgage cap for first-time buyers and a lending rate cut helped restore purchasing power in the housing market during the month.
Developers offered flexible payment plans and discounts for both new home projects and unsold stocks, which spurred homebuyers to speed up purchases in the primary market.
Looking ahead, we expect the upcoming implementation of the vacancy tax to prompt developers to actively dispose of unsold stock at attractive prices in the remainder of 2019. On the other hand, favourable factors, such as an interest rate cut, will bring some support to transaction volume.
Retail
The double whammy of escalating social unrest across the city and the protracted China-US trade war has resulted in further worsening of the retail sales. For the first nine months of 2019, total retail sales value dropped by 7.3% YoY. “Jewellery, watches and clocks, and valuable gifts” recorded the largest drop (40.8%).
There have been waves of shutdowns and lay-offs at retailers. The situation was as adverse as that during the Asian Financial Crisis in 1998.
Retailers and shopping malls in key shopping districts, have been badly impacted, as the protests centre on these districts. However, as people have avoided going to crowded areas, sales in community malls, neighbourhood malls and suburban malls, which offer daily necessities to locals, were relatively more resilient and saw solid sales even amid Hong Kong’s social unrest.
Looking ahead, it is difficult to see any upside for the retail sector in the coming months. Given the poor macro-economic conditions, coupled with the social unrest, consumer sentiment will remain weak.