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News from Knight Frank Hong Kong

Trade War has a Visible Impact on Kowloon Office Leasing Activities

19 December 2018

Grade-A Office

Hong Kong Island

The Grade-A office leasing market on Hong Kong Island remained subdued as uncertainties in the global economy loomed large. Sentiment is weak but this is also a traditionally low season, so there were no large leasing transactions in Central during the month. Rents in Central will continue to be under pressure as leasing activity remain restrained.

Kowloon

As expected, trade war has a visible impact on leasing activities on the Kowloon side, with around 80 transactions recorded compared to over 100 on average in the past. A number of significant leasing transactions, however, were recorded during the month, most of them in Kowloon East. The largely trade-related occupiers in Kowloon are watching the Sino-US negotiations closely but market outlook remains murky.

 

Residential

 

Residential prices have been falling since August this year, with the latest official number down 2.4% MoM in October, the largest drop in three years. New supply available, including unsold and presold units, is expected to reach 25,800 units in 2019. As uncertainty lingers, there is concern that if there is sufficient demand to take up this mounting supply.

Retail

Christmas is typically a peak selling season for retailers, but retailers in general remain cautious, The US-China trade war, together with RMB depreciation, has dampened mainland tourists’ desire to visit and shop in Hong Kong. The trade war has also soured the stock market, which in turn, has eroded local consumer sentiment. Looking ahead, overall retail sales in December and 2019 will remain lacklustre. We reiterate our forecast that prime street shop rents are on a downward trend and should drop by at least 5% in 2019.