PROPERTY OUTLOOK
Hong Kong property market ‘on the cusp of full recovery’ in 2022: JLL
Thanks to the strengthened demand in the retail and industrial property sectors, since 2021.
The office market of Hong Kong has entered the last phase of the current down cycle
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roperty analysts all have the same general outlook—the Hong Kong property market will see recovery in 2022, following the sustained economic growth in 2021; and despite the threats of the COVID-19 Omicron variant. CBRE Executive Director Marcos Chan said that the higher chance of partial resumption of cross-border travel with Mainland China would boost the retail and business activities in the city, whilst business spending will remain “largely prudent despite increasing levels of corporate activity. “The positive business outlook will see leasing demand strengthen in the retail and industrial property sectors and result in moderate rental and capital value growth, but the office sector is bounded by the upcoming supply boom, with rents poised to only stabilise in 2022 after a sharp decline from 2019 to 2021,” Chan said. JLL, meanwhile, said that the residential and industrial centres have overcome capital value corrections in 2020. It added that the whole property market of Hong Kong is “on the cusp of full recovery in 2022,” but only at a moderate level. Office rents enter recovery The office market of Hong Kong has entered the last phase of the “current down cycle and is on the cusp of recovery in the near future,” Alex Barnes, head of Agency Leasing at JLL Hong Kong said, adding that overall it is 6 HONG KONG BUSINESS ANNUAL 2022
The office sector is bounded by the upcoming supply boom, with rents poised to stabilise in 2022
expected to rise 0% to 5% next year. Gross leasing volume is seen to improve next year, supported by the resumption of travel with mainland China, he said, but “the vacancy rate will edge higher as there will be a considerable amount of new office supply slated for completion in 2022.” In the first 11 months of 2021, net absorption in the overall Grade A office market of Hong Kong was at -643,400 square feet (sq. ft.) but there was more expansion in the recent month and some tenants retract surrendering of their office which shows improving sentiment, JLL said. The overall vacancy rate was at 9.6% by end-November from the peak of 9.8% in September. Amongst the submarkets, JLL expected rent in Central is the strongest, rising by 5% to 10%, following a 1.2% rebound after a 3.2% dip in the first half of the year. Rent in the Tsimshatsui submarket is also seen to increase up to 5% in 2022, whilst Wanchai/Causeway Bay, Hong Kong East, and Kowloon East were seen to decline by around 5%. Wendy Lau, executive director and head of Hong Kong Office Services at Knight Frank, said in a report that they also expect Grade-A office rents to increase 5% to 10%, especially in Central, Admiralty, and Wan Chai districts. Lau also said that there will be a new supply of over 2.8 million sq. ft. of office space in the next two years, most of which will be in Central and Quarry Bay. Knight Frank also said that whilst the pandemic and work-from-home arrangements will affect the office rents, its global (Y)our Space Report showed that around 70% of Hong Kong enterprises plan to increase their office footprint in the next three years. Cushman and Wakefield Executive Director and Head of Office Services Hong Kong Keith Hemshall said that overall availability of Grade A office space is expected to increase to 16% to 17% by year-end and average rents to drop by 1% to 3%, with the completion of over 2 million sq. ft. of office space Two Taikoo Place in Hong Kong East, 98 How Ming Street in Kowloon East, and Airside atop Kai Tak MTR Station. “That said, we expect that anticipated border reopening will drive an improvement in the economy and the demand for office space will increase with an estimated net take-up of 300,000 – 500,000 (net floor area) for 2022. We expect banking & finance, insurance and business centre/co-working to continue to be active,” he said. Alan Yau, partner and head of Real Estate Hong Kong at KPMG China, said leasing demands will continue to improve for Hong Kong next year. Despite the continuing adoption of a hybrid model of work set up in some companies, Yau said that small and medium-sized organisations are still relying on physical setup. For the office sector, leasing momentum is expected to improve if cross-border travel with Mainland China
