Central District commercial building rents are expected to peak
DTZ reviewed the performance of the office and retail leasing market in Hong Kong in the first quarter. He pointed out that the two newly completed commercial buildings in the first quarter recorded a pre-leasing area of 12.75 million baht, plus Sino-US trade. Negotiations have progressed, driving the overall office building to recover from the negative absorption in the fourth quarter of last year to 77,101 square meters in the quarter. However, as the leasing demand of Chinese-funded enterprises has weakened, the rents in the Central District have been rampant during the quarter, reflecting that rents may peak.
In terms of future trends, DTZ’s Hong Kong Managing Director Xiao Lianghui expects the overall rental level to be stable. The trend of Super Grade A office space in the Central District will depend on whether the leasing market of Chinese-funded institutions will be reactivated. The current situation may be slightly under pressure, but there will be no new supply in the next few years unless the industry mainly leases office buildings as soon as possible. Otherwise, there is no room for price reduction.
Inbound visitors increase support and rent
The two major new transport infrastructures of the Hong Kong and Hong Kong-Zhuhai-Macau Bridges have been launched. The number of visitors to the Mainland in the first two months of the year has increased by 19% year-on-year. The number of returning passengers has also increased by 21% year-on-year. The increase in the number of passengers in the first quarter of the year was 1.1% and 2.6%, respectively. The increase in the number of shops in Tsim Sha Tsui and Mong Kok was 1.1% and 2.6% respectively. The increase in Causeway Bay on Hong Kong Island was only 0.6%. The rent in Central has continued to fall by 1.6%.
Mr. Lin Yingwei, executive director of DTZ and the head of the Hong Kong retail department, said that although the retail sales volume recorded a decline in the first two months, the number of visitors to Hong Kong increased and the renminbi rose during the quarter, which will support the retail market in Hong Kong. The opening of the high-speed rail and the Hong Kong-Zhuhai-Macau Bridge will significantly benefit the retail districts in Tsim Sha Tsui and Mong Kok over Hong Kong Island. If this trend continues, it is expected that the renting of the two core retail districts in Kowloon this year will be even greater than that in Causeway Bay. It is expected that rents in Tsim Sha Tsui and Mong Kok will increase by about 3% this year, while rents in Causeway Bay will remain flat. Rents in Central District are still under pressure. This year, the drop is between 5% and 7%.
Comment, space, order
The Mainland’s shared office leader, Space, signed a 10-year lease to Huaying last year, and rented a 7-storey floor in Wanchen A Hennessy, which will be in the second quarter of this year, but it was finally closed. Was asked if there would be a wave of rentbacks in the shared office. Xiao Lianghui believes that related companies have absorbed a lot of space in the past year and are currently in a consolidation period. In the future, they will become more cautious, depending on the occupancy rate of the shared office itself, and then decide on the pace of expansion.
In addition, with the development of the Greater Bay Area, more local investors and funds have gone to the Mainland to purchase investment properties, especially in Guangzhou and Shenzhen. Xiao Lianghui said that since the interest rate in Hong Kong is about 2%, and the return on investment in the relevant regions can reach 4% or more, the potential for increase in value is large, so it is more popular.