Hong Kong Island
The Grade-A office leasing market in Central was quiet in December, because of the traditional holiday season and the limited amount of space available for lease. With a number of large tenants expected to move from of Central to decentralised areas in the coming 24 months, David Ji, Director and Head of Research & Consultancy, Greater China, Knight Frank, expects a slight downward rental adjustment especially for those premium Grade-A offices.
Leasing activity in Kowloon slowed in December, with just around 70 transactions recorded. Given the gloomy global economic outlook, tenants in Kowloon East were conservative with their real estate budgets. Looking forward, with the results of the China-US trade negotiations remaining uncertain, more companies are expected to move to smaller offices or buildings with lower rents in 2019 to reduce costs.
The Hong Kong residential market reversed its uptrend since July 2018, with prices dropping over 7% from the peak, according to the Rating and Valuation Department. Average transaction volume decreased to just 3,500 per month for the last five months of 2018. Nevertheless, luxury homes stayed resilient. In December 2018, there are some notable residential sales with consideration of over HK$75 million. With the prospect of the China-US trade talks remain unclear, market sentiment will remain weak. We expect the residential price falls to narrow later in the year, with mass and luxury residential prices dropping up to 10% in 2019.
Hong Kong’s retail sector is experiencing a slowdown, with total retail sales recording mild growth of 1.4% year on year in value and 1.2 % YoY in volume in November 2018, the slowest growth in 17 months. Growing economic uncertainties continued to be reflected in Hong Kong retail, while consumer sentiment was affected by weaker asset prices and external uncertainty. Nonetheless, the expected record-breaking tourism arrivals to Hong Kong to hit over 60 million in 2018 has become an impetus for retailers to put innovative retail strategies into action.