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Knight Frank launches the Hong Kong Monthly Report July Issue

01 August 2019

Grade-A Office
Hong Kong Island

David Ji, Director, Head of Research & Consultancy, Greater China, says, “Affected by uncertainty in the US–China trade negotiations and slowing global economic growth, leasing demand for Grade-A offices in Central was softening. Premium Grade-A offices in this CBD area were particularly affected, as tenants’ affordability was undermined. Buildings leased for less than HK$100 per sq ft per month were less impacted because of the expansion of some financial and legal firms. In Island East, demand for Quarry Bay offices was strong thanks to its maturing business infrastructure and the continuous influx of decentralisation tenants. Due to different demand drivers and tenant expectations, rental growth in Central and Quarry Bay is expected to polarise for the rest of 2019.”


Leasing momentum in the Grade-A office market in Kowloon weakened in June amid the unclear market outlook, with the number of transactions falling around 30% MoM. Most of the deals were less than 3,000 sq ft and were recorded in Kowloon East. Facing downbeat market sentiment, some companies relocated their offices to buildings with lower rents.

Despite softening leasing demand, overall Grade-A office rents in Kowloon increased by 0.5% MoM. However, this was due to a few exceptional cases. We expect overall rents in Kowloon to increase only 1% to 3% for the whole year in 2019.


Hong Kong’s monthly residential sales volume tumbled over 43% in June to a four-month low of 4,627 units, according to the Land Registry. Primary sales in June dropped to the lowest monthly level this year, totalling just 1,111 units. The latest official data shows that overall residential prices increased 10.4% From January to May. However, Knight Frank’s earlier study on the correlation between house prices and the Hang Seng Index, a barometer of the city’s economy, found that mass home price movements closely followed the HSI trend with a time lag of up to three months. So with the HSI having dropped close to 10% at a point since May, there is a possibility for mass home prices to undergo some corresponding adjustment.      

The luxury home market is another story. Despite recent market turbulence, high net worth individuals were not afraid of paying top dollar for luxury properties here.


Hong Kong’s retail sales had been falling since February this year, with retail sales for May dropping 1.3% YoY in value. The retail sales performance of the luxury sector also remained weak, down 2.7% YoY.

Deteriorating luxury retail sales have made the recovery of the retail leasing market more challenging, especially for prime street shops. With vacant shops remaining unfilled, rents continued to fall.

With most of the luxury sector’s physical expansion slowing down, some non-luxury retailers are seizing the opportunity to take up space in the core areas outside Central.

Retail business performance is expected to remain weak amid external economic and local political uncertainties. We expect rents for prime street shops to decrease 5–10% in 2019, while rents for shopping malls should remain relatively stable.