Grade-A Office Still The Weakest Property Sector in Hong Kong

Based on the most recent research report conducted by Knight Franks, in March 2012, the Grade-A office market continued to be the weakest property sector in Hong Kong property. The retail sector persists to outperform on the back of strong demand from retailers, at the same time as the residential market reported additional rebounds throughout the traditional peak season. However, the Grade-A office leasing market saw signs of more correction, with large-scale transactions continued to be scarce.  

Prime office

Companies continued to scale back their operations, ensuing in slow-moving leasing activity. Only a handful of Grade-A office leasing transactions were documented last month. Remarkable deals included a 12,000-sq-ft low floor in Exchange Square in Central, taken up by Hong Kong Exchanges and Clearing for HK$100 per sq ft per month.

 Armani leased two floors totaling 34,000 sq ft in Kerry Centre, Quarry Bay for HK$40 per sq ft per month, while Swatch committed to one and a half floors in the same building, covering 25,000 sq ft.  

More companies looked to surrender existing leases owing to weak business environment. Grade-A office rents in Central had decreased by about 16% by the end of March, from its peak in mid-2011.

Mr Thomas Lam Ho Man, Head of Research at Knight Frank in Greater China, anticipates the same to go down further 10–15% in the rest of 2012. In the meantime, rents in non-core districts will stay, thanks to low vacancy levels and continued relocation demand.  

 Luxury Residential Sentiment in the residential market remained robust, fuelled by more reductions in mortgage interest rates and the results of two residential site tenders. Residential sales surged 192% month on month, the highest level since November 2010. The number of secondary home sales climbed up by 200% to 9,923 and a few luxury flats were allegedly transacted at record-breaking prices.

A 3,966-sq-ft, high-floor duplex in Hong Kong Parkview, Island South and a 2,169-sq-ft duplex in Hillsborough Court, Mid-Levels Central were sold for HK$19,617 and HK$25,357 per sq ft, respectively—the highest prices in these developments to date.   Mr. Lam thinks this momentum, however, will not be maintained with slow progress in the global economic recovery. Homebuyers will waver to buy with decreasing available flats, escalating asking prices and limited room for negotiation. Residential sales and home prices may fall again in the coming months.  

 

Prime Retail

Rivalry between retailers for prime retail space showed no signs of abating. From February, the sales value of retail properties has doubled to about HK$7 billion and shop rents in prime retail areas increased by 3.5% in the first quarter of this year. The outlook for Hong Kong’s prime retail market continues to be positive in the midst of sustained leasing demand. Luxury retailers are expected to keep on outbidding existing tenants and secure prime spaces. Mr. Lam expects retail rents in core areas to rise about 10% in 2012.

 

Exclusive Free Casino Bonuses


Free Casino Bonuses? Join us here