Knight Frank launches the latest Hong Kong Monthly Report. In the office market. Leasing activity on Hong Kong Island increased significantly in June, the market in Kowloon also remained active. In the residential market, the primary and secondary markets were robust, with a particularly large uptick in primary sales compared to the previous month. Hong Kong’s retail market continued its gradual recovery, given the easing of restriction measures, the mass vaccine rollout, and less public concern about the COVID-19 situation.

Grade-A Office                                                                                                         
Hong Kong Island

Leasing activity on Hong Kong Island increased significantly in June, leading to a drop in the vacancy rate, especially in the non-core business areas. More financial institutions, especially MNCs, are considering implementing flexible workspace in their real estate plans, reflected by stronger leasing demand for co-working space.

Given the more stable business environment, the market outlook remained positive, and we expect rents to pick up gradually in the coming months.

Kowloon

As with the office leasing market on Hong Kong Island, the market in Kowloon remained active in June. Transactions were dominated by leases of 5,000 sq ft or less in Kowloon East. 

Rents in Kowloon have continued to show a moderate adjustment over the past few months, supporting our view of a bottoming-out trend in the first three quarters of 2021. We expect the relaxation of border restrictions to drive real estate decisions, especially from Chinese mainland companies, stimulating an uptrend in activity and a rental rebound in Q4.

Residential

Homebuyer sentiment in the residential market remained positive in June. Both the primary and secondary markets were robust, with a particularly large uptick in primary sales compared to the previous month.

The luxury segment has proven resilient. There were plenty of major transactions of over HK$100 million during the month.

On the leasing front, local moves were active, particularly the high-value leasing market with an average monthly rent of HK$100,000 or above. More property owners have been putting up properties for lease, while some tenants were looking to upgrade their accommodation for the same budget.

Thanks to the continued improvement in the local economy and the booming IPO market, we expect purchase sentiment in the residential market to remain upbeat. Overall residential home prices are forecast to increase by 2–3% for the rest of 2021, reaching new heights.

Retail

Hong Kong’s retail market continued its gradual recovery, given the easing of restriction measures, the mass vaccine rollout, and less public concern about the COVID-19 situation. According to the latest official statistics, total retail sales value in May was HK$29.6 billion, an increase of 10.5% YoY. This was the fourth consecutive month with a YoY rebound in sales. We expect total retail sales value to increase by 10% YoY this year to about HK$360 billion.

Amid the predicted recovery of the Hong Kong economy and the eventual opening-up of borders, retail landlords of prime streets and shopping malls have been more optimistic about the outlook of the retail property market. As vacant shops are gradually being absorbed, landlords have been firmer on rental negotiations. Some landlords have begun discussing rent increases with tenants before upcoming lease renewals.

Thanks to gradually recovering consumer sentiment, the imminent launch of the Consumption Voucher Scheme, and more widespread vaccinations, we expect to see a continued upsurge in shop traffic and the revival of retail business.