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Hong Kong home sales rebound, but commercial sectors soften

15 May 2019

Grade-A Office
Hong Kong Island

Global economic uncertainties have continued to dent leasing demand for Grade-A office space in Central. In order to reduce rental costs, a number of large multinationals and corporates have planned to exit the CBD to decentralized areas. Meanwhile, there will be around 1.9 million sq ft of new space available in Central and Admiralty in the coming 12 to 18 months, which is equivalent of 10% of existing stock. Therefore, we expect rents in the CBD to soften, as landlords of premium Grade-A office buildings will be under pressure. Meanwhile, some smaller MNCs may move in to fill the vacancies, provided that landlords are willing to cut their asking rents or divide each floor into smaller units to secure occupancy.


The Grade-A office leasing market in Kowloon was generally active in March, with around 120 sizeable transactions recorded, almost double the figure in February. One significant transaction during the month was WeWork’s lease of the space between 26/F and 31/F in the Gateway Sun Life Tower Extension in Tsim Sha Tsui. Apart from this latest take-up, Kowloon office market is dominated by cost-conscious tenants amid economic uncertainties.


In March, total residential sales volume soared 27.9% MoM to 5,231 units, according to the Land Registry, making it the first month with over 5,000 monthly transactions since July 2018. The latest official data shows that overall property prices increased by 1.3% MoM in February led by a hefty overall price increase in small and medium-sized units.

Entering the traditional peak season in March, the luxury leasing market also saw a rebound in transactions. Some districts such as Mid-levels Central and Happy Valley recorded active leasing activity. Landlords have remained firm in their negotiations. 

David Ji, Director and Head of Research and Consultancy, Greater China, says, “Even as the vacancy tax being debated, consensus market view seems already suggest that it will have limited long-term impact on supply and prices.”


Hong Kong’s retail sales in February slumped 10.1% YoY in value, ending the growth trend since March 2017 and registering the biggest decline since August 2016. The weak retail sales continued to reflect a cautious consumer sentiment caused by external uncertainties, which also exerted downward pressure on rents in core retail areas.

Looking ahead, the retail market is likely to register flat growth or even a mild drop in the first quarter of this year. Nevertheless, consumer sentiment is likely to be underpinned by favourable employment figures and an improving stock market. Together with rising tourist arrivals and new retail potential, we expect both retail sentiment and sales to improve in the second half of the year, albeit at a slow pace.