Grade-A Office
Hong Kong Island
In February, rents of Grade-A office in Central stayed flat at HK$164 per sq ft and vacancy rate remained low at 1.5%. Stocks of larger floor space will only be released in around 2020 to 2021. Even though there were some surrender spaces available in the market, those were mainly of less than 5,000 sq ft. Due to the scarce supply, major landlords in Central stood firm on rents. In contrast, smaller landlords tended to be more flexible and were willing to offer incentives in order to secure more transactions.
Kowloon
In February, the number of office leasing transactions in Kowloon dropped to around 70 from over 120 in the previous month. Most of the deals were renewal cases, and of medium-scale, with an average area of 5,600 sq ft. The opening of the High Speed Rail has not significantly boosted office demand from Mainland firms. However, in Tsim Sha Tsui, there were some demand from small and medium-sized Mainland start-ups of various sectors.
Residential
As the traditional low season began in February, total transaction volume of residential units dropped 10% MoM to 4,089, according to The Land Registry. Monthly transaction has been under 5,000 units since July 2018, when property prices started falling. The low monthly transaction volume did little to improve buyers’ perspective of the market prospect. There have been sporadic activities in the luxury residential sales market, as some investors capitalised on the last stock market rally.
Retail
Hong Kong’s retail market has entered a “new normal”. Retailers have turned cautious about further expansion. We also see more shopping mall landlords willing to lease space to entertainment tenants to diversify their retail mix.
David Ji, Director and Head of Research & Consultancy, Greater China, Knight Frank, expects shopping centres, especially those with excellent positioning, to stand out from the rest and maintain modest growth in rents this year, but prime street retail rents in core districts should continue to drop mildly until the vacant shops in prime street locations are occupied.