PROPERTY OUTLOOK
Vacancy rates will continue to rise in 2021 at a slower pace
Property market to slowly recover in 2021 The gradual improvement is amidst major vaccine developments and easing of restrictions
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n 2020, Hong Kong’s property market has been heavily affected as many businesses downsized their manpower, reduced costs, and implemented “work from home” arrangements amidst the COVID-19 pandemic. According to Savills, local unemployment rose by over 130,000 people as petitions presented for bankruptcy and winding-up increased by more than 550 during the year, even with support from the government. With this, multinational corporations (MNCs) have begun to cut down on their operations whilst working from home arrangements have been adopted mostly by overseas corporates. However, with developments of major vaccines making headlines and restrictions gradually easing, improvements might be visible in the property market scene within 2021. Office rents’ lowest drop Savills’ data has seen overall Grade A rents crashing by 16.6% over 2020
6 HONG KONG BUSINESS ANNUAL 2021
Despite subdued leasing demand in the near term, gross leasing volume is expected to pick up in 2021
as a whole, marking the largest yearly decline since 2009. The Wanchai/Causeway Bay submarket posted the largest decrease over the year with a 22% fall, followed by Central (-18.9%) and Island East (-15.3%). Moreover, overall Grade A office vacancy rose from 4.7% at the end of 2019 to 8.4% in the last month of 2020. “Vacancy rates remain stubbornly high and are expected to rise into this year as corporate woes persist,” according to Savills senior director for research Simon Smith. Meanwhile, JLL Hong Kong data shows leasing demand remains subdued with the net absorption reaching -2.5 million sqft. this year, amongst the highest withdrawal in the office market ever recorded. Head of markets Alex Barnes mentioned that despite subdued leasing demand in the near term, gross leasing volume is expected to pick up in 2021 as tenants start making longer term real estate decisions this year. “The vacancy rates will continue
to rise in 2021, albeit at a slower pace. The rental fall would be less significant next year compared with 2020,” Barnes said. Both Savills and JLL expect overall office rents to still fall by 5% to 10% in 2021. “Vaccine and travel dependent, we could see a period of rental stability over the second half before supply challenges in 2022 again put landlords on the back foot,” the Savills report stated. “Lower rents can increase the city’s competitiveness, potentially positioning Hong Kong as a more attractive location to conduct business,” Barnes added. Pressure on residential market prices to ease Global quantitative easing to the COVID-19 pandemic has relieved the pressure on residential prices caused by a soft economy. JLL notes that combined with the support of strong pent-up demand and the low level of new housing supply, capital values of mass
