According to Knight Franks' latest research report, in February 2012, Hong Kong’s retail market remained strong and continued to outperform other property sectors. Meanwhile, the residential market saw a notable rebound in sales volume with prices stabilising after the Lunar New Year. The office market stayed relatively quiet with uncertainty in the global economy.
Companies are likely to become more cost-sensitive and the number of tenants surrendering existing leases is expected to rise. For example, a UK-based financial firm is looking for a replacement tenant for its about 25,000-sq-ft office in Central, while a Chinese securities firm in the CBD is also intending to surrender one of its three floors. In the leasing market, a marine insurance firm moved from Bank of America Tower in Central to the 6,350-sq-ft, 25th floor of Fortis Tower in Wan Chai. Meanwhile, an aluminium producer decided to relocate from Admiralty Centre in Admiralty to a 4,300-sq-ft office at 88 Gloucester Road in Wan Chai. Knight Frank expects Grade-A office rents in Central to drop 10–15% in the first half of 2012. Rents in core districts will remain relatively soft until the global economy shows signs of emerging out of recession.
Although the sales of luxury homes valued over HK$10 million decreased a further 23.6% to total 294, the average luxury home price grew 0.6% in February, led by growths of 3.6% in Pokfulam and 0.6% in Mid-Levels. Uncertainty in the property market is likely to remain given the slow progress in solving the European sovereign debt crisis. Residential sales may dip again in the coming months, while the rental market will remain lukewarm. We believe both luxury prices and rents are likely to fall during the year.
Despite the fragile global economy, Hong Kong has strong growth potential and is likely to remain the focus for international retailers. For example, Zara reportedly pre-leased over 6,500 sq ft of space on the ground to second floors of Loke Yew Building in Central for a monthly rent of HK$3.5 million or HK$538 per sq ft. This will be Zara’s first street-level shop in Hong Kong. Knight Frank expects this trend to continue and spill over from prime to non-core areas. Rents in core retail districts will increase by about 10% this year, compared with about 5% growth in non-core areas.
For further information, please contact:
Ms. Sharon Ng, Assistant Public Relations Manager, Knight Frank
Tel: + (852) 2846 7175 Fax: +(852) 2840 0600