Protests continue to have a major impact on Hong Kong’s office and tourism markets.
According to JLL’s latest Property Market Monitor Report, Hong Kong’s central region office vacancy rate has risen to a three-year high, as commercial tenants postpone expansion plans due to growing economic and political uncertainty with Mainland China. In July 2019, the office leasing market in Hong Kong had a negative take-up rate. for sale
In July, the Central occupier sector shrank by 56,100 square feet, resulting in a three-year high vacancy rate of 2.6 percent. However, leasing operation outside of Central drove a net take-up of 75,900 square feet in the overall market.
Standard Chartered Bank leased 18,700 sq. ft. at Oxford House to accommodate the expansion of their virtual banking arm, and recent commitments at K11 Atelier King’s Road in North Point led to the vacancy rate tightening back down to 2.7 percent, the lowest among the city’s main office submarkets.
According to Alex Barnes, Head of Markets at JLL Hong Kong, “As overseas decision makers weigh the impact of growing global economic woes on Hong Kong, demand has decreased noticeably, especially in Central. Without a substantial increase in vacancy or significant new supply, it will take time to translate a lack of conventional demand into a meaningful rental reduction. Businesses suffering from the effects of the recession are unlikely to see a 10–15% reduction in rent as important, given the possibility of seeking dramatically cheaper alternatives.
Coworking demand, which continues to outperform the overall trend, is a ray of hope for landlords with vacancies. Because of the large number of requests from operators, landlords are unlikely to make significant rental reductions in the near future. Demand for co-working spaces is expected to rise as occupiers become more serious about business planning.”
“Few properties changed hands in the office investment market this month as investors digested the increased turmoil surrounding the global economic outlook as well as the escalating civil unrest. Despite this, the decline in revenue has had little impact on pricing, with vendors maintaining their asking rates. A small unit in Admiralty Centre Tower 1 reportedly sold for HKD 200 million (HKD 30,465 per sq. ft), a 272 percent increase over a 10-year period “”Period,” said Denis Ma, Hong Kong’s Head of Research.
The full effect of the anti-extradition bill protests on the city’s retail market has yet to be seen in the latest data on inbound tourism figures, with total tourist arrivals increasing by 8.5 percent y-o-y in June. During the same time, total retail sales dropped by 6.7 percent year over year, continuing a downward trend from previous months. The luxury goods industry was hit the hardest, with sales of jewelry and watches falling 17.1 percent year over year.
Ma went on to say, “During the ongoing demonstrations, most retailers have taken a ‘wait-and-see’ approach to expansion needs. Among the few notable leasing transactions documented, a retailer reportedly leased a two-story shop (19,064 sq. ft) at 100QRC in Central for HKD 1.8 million per month, which is 10% less than the previous lease “”Landlord.”
