Workplace leasing sentiment improved, excessive road vacancies stabilized
HONG KONG SAR – Media OutReach Newswire – 10 April 2024 – World actual property companies agency Cushman & Wakefield right now held its Hong Kong Property Markets Q1 2024 Evaluation and Outlook press convention. Following the Authorities’s announcement within the newest Price range that it could elevate all demand-side administration measures for residential properties, the market responded positively, with major and secondary residential transactions strengthening notably and residential costs choosing up from March onwards. Within the workplace sector, general web absorption in Q1 remained optimistic, with the quarter additionally witnessing a y-o-y rise for brand new lettings, regardless of the excessive availability fee retaining rents beneath strain. For retail, customer spending continued to assist a gentle restoration available in the market, with the general excessive road emptiness fee remaining broadly secure.
Grade A workplace leasing market: Web absorption stayed optimistic in Q1 2024, corporations in search of upgrading and relocation alternatives
Total web absorption of Grade A workplace area in Q1 remained optimistic at 264,200 sq ft, primarily pushed by large-scale leasing transactions at new initiatives in Kowloon East, with the submarket recording web absorption of 289,700 sq ft. 4 new workplace buildings accomplished within the quarter, situated in Higher Central, Wan Chai/Causeway Bay, Hong Kong South, and Kowloon West. The growth of leasable workplace area introduced the supply fee as much as 19.6%. Rental ranges remained beneath strain within the quarter, however the tempo of decline was slower, edging down 0.6% q-o-q in Q1, and 6.7% y-o-y (Chart 1).
Chart 1: Rents of Grade A places of work in Hong Kong
https://drive.google.com/file/d/1SyiYOG7hz48uZfHojgCYM3MjJjKNqsna/view?usp=drivesdk
Supply: Cushman & Wakefield Analysis
By way of new letting actions, a complete of 889,000 sq ft of leased area was recorded in Q1, a rise of greater than 40% y-o-y. Kowloon East was essentially the most sought-after submarket, accounting for greater than 40% of the newly leased area, with the district benefitting from enticing rents with a higher providing of recent top of the range buildings and ESG-certified workplace area. By enterprise sector, the general public sector (23%) accounted for the best share of newly leased area, whereas the banking and finance (21%), skilled companies (15%) and insurance coverage (13%) sectors additionally recorded double-digit shares.
John Siu, Managing Director, Head of Challenge and Occupier Companies, Hong Kong, Cushman & Wakefield, stated, “Now we have noticed a number of large-scale workplace leasing transactions over the quarter, whereas the whole new lettings previously three quarters had been larger than the five-year quarterly common of 640,000 sq ft, indicating a relative enchancment in leasing sentiment. At the moment, many multinational corporations are making ESG a key requirement when selecting native places of work. With extra new workplace buildings scheduled for completion this yr, there shall be a higher spectrum of high quality places of work with worldwide ESG constructing certifications out there available in the market, which is able to encourage extra upgrading and relocation actions to happen whereas rents are nonetheless enticing.”
Retail leasing market: Total excessive road emptiness fee stabilized, rents throughout districts rose steadily
In opposition to the backdrop of fixing consumption patterns from each vacationers and residents, complete Hong Kong retail gross sales for the January to February 2024 interval mixed recorded HK$70.3 billion, rising at a modest 1.4% y-o-y, a considerably slower tempo in comparison with final yr. Amongst retail classes, gross sales of Medicines & Cosmetics recorded y-o-y progress of 21.7%, adopted by Jewelry & Watches and Vogue & Equipment at 8.8% and seven.4%, respectively. Supported by vacationer spending, the general excessive road emptiness fee largely stabilized. Retail leasing actions had been comparatively extra targeting Hong Kong Island in Q1, with the emptiness fee in Central dropping by 1.5 share factors q-o-q to file 7.0%, whereas emptiness in Causeway Bay remained secure at 2.6%. Nonetheless, with some festive interval pop-up shops now departing excessive streets, emptiness charges in Mongkok and Tsimshatsui rose to 11.1% and 11.8%, respectively.
Regardless of the town’s inbound tourism restoration, the structural shift of Hong Kong residents extra steadily touring northbound to spend within the Higher Bay Space mainland cities has hindered native consumption on the town, in flip dampening restoration in retail hire progress. Consequently, excessive road rents throughout retail districts recorded delicate progress in Q1, starting from 0% to 1% q-o-q. Within the F&B sector, native operators typically remained cautious, resulting in softer progress for F&B rents. Causeway Bay and Central F&B rents edged up 1% q-o-q, whereas Tsimshatsui and Mongkok recorded a drop of two% q-o-q.
Chart 2: Excessive road retail rents in prime districts in Hong Kong
https://drive.google.com/file/d/15xK6ZQQd7oYy6bbG6THJLDvbniwxiLaw/view?usp=drivesdk
Supply: Cushman & Wakefield Analysis
Kevin Lam, Government Director, Head of Retail Companies, Company & Administration, Hong Kong, Cushman & Wakefield, commented, “Retail leasing and growth actions previously quarter had been targeting Hong Kong Island. Whereas rents are nonetheless at a horny degree, retailers are on the lookout for consolidation and relocation alternatives in prime areas. Though the development of Hong Kong residents touring extra steadily northbound to spend in mainland cities has hindered native consumption and therefore rental restoration, we imagine that the federal government initiatives to advertise the town’s tourism and develop a mega occasion financial system may assist generate footfall on excessive streets, in addition to giving an extra enhance to vacationer retail spending.
“On the identical time, the Particular person Go to Scheme has been additional expanded to extra mainland cities, and it’s anticipated to profit trades such because the F&B and medicines & cosmetics sectors. What’s extra, Hong
Kong Immigration Division knowledge exhibits that the variety of new functions permitted beneath varied expertise and admission schemes in 2023 was 4 occasions larger than that in 2022. The arrivals of expertise and their households will in flip turn out to be a brand new supply of spending energy within the native market. Now we have additionally seen mainland retailers changing into extra energetic in coming into the Hong Kong retail market. Other than some fashionable mainland F&B chains, experiential retail, way of life and athleisure model names are additionally actively exploring growth alternatives in Hong Kong, providing a variety of brand-new client experiences to the town’s retail ecosystem. We count on retail rents to take care of modest and low single-digit progress in 1H 2024.”
Residential market: Housing market bottomed out in February following price range announcement, residence costs now anticipated to rebound 0% to three% in 1H 2024
The residential market lastly witnessed a rebound in Q1 2024. Though general residential transactions remained subdued in January and February earlier than the Hong Kong Authorities Price range announcement, market sentiment improved notably following the federal government’s choice on February 28 to fully withdraw all demand-side administration cooling measures within the housing market (often called “spicy measures”). Builders took benefit of the scenario and actively launched new initiatives, whereas potential consumers, traders, and non-local consumers all grew to become energetic once more in in search of residential properties. This supported transactions in each major and secondary markets. Whole residential transaction numbers climbed 29% q-o-q to achieve round 9,820 models in Q1 2024, though this nonetheless represented a drop of 30% y-o-y. Within the month of March, residential transactions rebounded to greater than 3,970, marking a big month-to-month improve of 67% (Determine 3).
Chart 3: Variety of residential sale & buy agreements
https://drive.google.com/file/d/1FlbjQCHQmUherZEdnSdDIjQsDIZXzoMR/view?usp=drivesdk
Supply: Land Registry, Cushman & Wakefield Analysis
Edgar Lai, Senior Director, Valuation and Consultancy Companies, Hong Kong, Cushman & Wakefield, talked about, “The Ranking and Valuation Division knowledge exhibits that general residential costs in January and February continued to say no, which mixed a 2.9% drop from end-2023, and resulted in a 14.6% decline over the previous ten months. Nonetheless, based on Cushman & Wakefield’s small to medium-sized residential value index, residence costs bottomed out in February and began to rebound after the withdrawal of all of the cooling measures, with a month-to-month improve of round 1.5% in March. Dwelling costs in all our market segments have turned from a decline to an increase since March. Among the many segments, the value degree rose most notably in Metropolis One Shatin, representing the small-sized market, with a month-to-month improve of 14.2% in March and a quarterly improve of 10.7%. Taikoo Shing, representing the middle-sized market, recorded a 1.4% month-to-month improve in March, however nonetheless a slight correction of 1.4% over the quarter. As for the posh phase, Residence Bel-Air noticed a 0.8% improve in March, with an general 2.1% lower in Q1 2024.”
Rosanna Tang, Government Director, Head of Analysis, Hong Kong, Cushman & Wakefield, added, “Wanting forward, with the whole withdrawal of cooling measures by the federal government, market confidence is regularly stabilizing and enhancing. Whereas builders actively promote their new initiatives, the availability of second-hand properties has additionally elevated, resulting in a notable rebound of transaction quantity in each major and secondary markets. This additionally signifies that pent-up demand is being regularly launched from first-time consumers, upgraders, non-local consumers, and even traders after the withdrawal of cooling measures. We forecast a 30% to 40% rebound in residential transaction quantity for the complete yr of 2024, reaching a degree of 55,000 to 60,000 models. As for residence costs, we imagine that the pricing degree has now bottomed and can stabilize, though a big rebound isn’t probably. The housing market remains to be going through financial uncertainties amid a excessive rate of interest surroundings. That is mixed with plentiful provide within the major market, the place builders are retaining asking costs aligned to the market, in flip limiting owners’ potential to boost costs within the secondary market. For 1H 2024, we count on the general residential value to mildly get better within the vary of 0% to +3%. If the US Federal Reserve confirms rate of interest cuts in 2H 2024, we anticipate a possible full-year value rebound to achieve +5% to +7%.”
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(From left to proper) Kevin Lam, Government Director, Head of Retail Companies, Company & Administration, Hong Kong, Cushman & Wakefield; John Siu, Managing Director, Head of Challenge and Occupier Companies, Hong Kong, Cushman & Wakefield; Rosanna Tang, Government Director, Head of Analysis, Hong Kong, Cushman & Wakefield and Edgar Lai, Senior Director, Valuation and Consultancy Companies, Hong Kong, Cushman & Wakefield.
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Cushman & Wakefield (NYSE: CWK) is a number one world business actual property companies agency for property homeowners and occupiers with roughly 52,000 staff in almost 400 places of work and 60 nations. In Higher China, a community of 23 places of work serves native markets throughout the area. In 2023, the agency reported income of $9.5 billion throughout its core companies of valuation, consulting, challenge & improvement companies, capital markets, challenge & occupier companies, industrial & logistics, retail and others. It additionally receives quite a few trade and enterprise accolades for its award-winning tradition and dedication to Variety, Fairness and Inclusion (DEI), sustainability and extra. For extra data, go to www.cushmanwakefield.com.hk or observe us on LinkedIn (https://www.linkedin.com/firm/cushman-&-wakefield-greater-china).