This picture taken on Aug 3, 2019 shows a general view of residential and commercial buildings in the Kowloon district (foreground) with the skyline of Hong Kong Island past Victoria Harbour (center) in the distance.
(ANTHONY WALLACE / AFP)
The expected relaxation of entry quarantine requirements, coupled with the ongoing economic recovery, will continue to bolster leasing demand and help stabilize rental and capital value growth for the next six to 12 months, international commercial real estate services firm CBRE said on Tuesday.
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The company reported that grade A office leasing volume in Hong Kong registered 1.3 million square foot in the third quarter this year, largely on par with that of the previous quarter, while total occupancy contracted by 119,320 square foot, the eighth consecutive quarter of negative take-up, as new and expansionary demand was limited.
The overall vacancies for grade A offices rose 0.2 percentage points to 11 percent quarter-on-quarter, pushing the overall vacant space to a record 9 million square foot, with the vacancy rate in Hong Kong East rising the fastest, reaching 8.5 percent, a 16-year high, according to the company.
Improved leasing momentum ensured the rental decline continued to soften this quarter, with overall rents falling 0.9 percent quarter-on-quarter following a 5.3 percent decline in the first six months.
Hong Kong’s economic outlook turns more upbeat as the local pandemic is more contained, leading to the resumption of most business activities.
Marcos Chan, executive director and head of research for CBRE Hong Kong
Leasing volumes continued to rise steadily as rents showed signs of bottoming out, but overall occupancy rates continued to fall in the third quarter due to high vacancy rates and ample new supply, despite the narrowed decline in rents, said Ada Fung, executive director and head of office services for CBRE Hong Kong.
If the quarantine measures are further relaxed, the demand for office rentals from Chinese mainland companies will increase with the return of inbound traveling, Fung added.
“Hong Kong’s economic outlook turns more upbeat as the local pandemic is more contained, leading to the resumption of most business activities.” said Marcos Chan, executive director and head of research for CBRE Hong Kong.
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The continuous decline in the unemployment rate, along with the launch of electronic consumption vouchers, will boost consumer activity in the short run, with the retail market expected to recover more significantly for the rest of the year, Chan said.
Despite the improvement in leasing momentum, vacancy rates in core areas will remain high for some time as the gap between landlords and retailers on the expected market development outlook takes time to narrow, Lawrence Wan, the company’s senior director of advisory and transaction services in retail, said.