After months of violent citywide protests and the novel coronavirus outbreak, the outlook for Hong Kong’s property market is gloomy, new data released on Wednesday shows. An indicator of total rental demand for grade A office space reported an 18-year low, while overall availability of street shops in prime districts rose to a four-year high in the first quarter of 2020.
Net absorption, a measure of the net change in commercial office space supply, fell into a negative territory for the second consecutive quarter in March, indicating less space had been leased. This has not been seen since 2009.
As global economies show no signs of recovering and working from home becomes the new normal under coronavirus threat, demand for office buildings will continue to go down
Alan Lok
Hong Kong-based executive director of office services at CBRE
The first three months of the year ended with a negative net absorption of 466,700 square feet – the lowest level since the second quarter of 2002, data from CBRE, the world's largest commercial real estate services and investment firm, shows.
The overall vacancy rate of street stores in the city’s core shopping districts soared to 8.6 percent – the highest level in four years. The rents of street shops plunged 10.3 percent in the first three months of 2020, compared with the same period last year. This followed a quarterly decline of 9.7 percent during the final quarter of 2019.
In Central, the world’s most expensive office market, where rents posted a quarterly drop of 4.1 percent, availability skyrocketed to 14.9 percent, according to CBRE.
As investor sentiment remains weak, there were only deals worth a total of HK$398 million ($51.4 million) being closed in the first quarter – the lowest level since 2005.
By year's end, prime districts including Central, Wan Chai and Causeway Bay are projected to register as much as 15 percent drops in rents, Alan Lok, Hong Kong-based executive director of office services at CBRE, told an online media briefing on Wednesday.
“As global economies show no signs of recovering and working from home becomes the new normal under coronavirus threat, demand for office buildings will continue to go down,” Lok said.
Some multinationals, which have long been scared off by Hong Kong’s unaffordable rents, see it as a good time to make inroads into the Asia’s financial center and to occupy some spaces at bargain prices, said Lawrence Wan, senior director for advisory and transaction services in retail for CBRE Hong Kong.
“For investors, it’s critical to think of the longer term. The current difficulties are cyclical. Once these difficulties are gone, Hong Kong will remain as one of the most competitive markets in the world,” said Tom Gaffney, regional managing director of CBRE Greater Bay Area and Hong Kong. “Its long-term competitiveness stays solid.”
