Hong Kong, 19 February 2020 – Initial indicators make it reasonable to expect Hong Kong’s property market to reflect a similar cycle to that of the outbreak of SARS in 2003, with a steep downturn that will persist until midway through 2020, according to a new local market report released by Colliers International (NASDAQ: CIGI; TSX: CIGI), a global leader in commercial real estate services.
The report outlines that the Coronavirus will likely create significant price corrections in the retail and hospitality sector, due to further weakening of the travel and tourism sectors, and office leasing activity is expected to stay slow, forcing rents to fall sooner, but not more, than originally anticipated.
"Despite positivity at the start of Q1, the Coronavirus is compounding Hong Kong’s recent problems – social unrest and US-China trade tensions – and preventing growth activity such as additional IPO launches, business expansion in Hong Kong and cross-border trade due to travel restrictions," said Rosanna Tang, Head of Research, Hong Kong and Southern China, Colliers International.
Capital Markets and Investments
"With capital values further declining due to the Coronavirus, there is an opportunity for new investors to enter the market as buyers start to see more prime properties become available at heavily discounted prices. That said, we see office prices rebounding quickly once demand returns amid limited supply, with strata-titled office space, en-bloc office assets in fringe areas and hotels being key targets," said Antonio Wu, Deputy Managing Director, Capital Markets, Asia.
"For occupiers, we expect the challenging business situation to persist and we reiterate our forecast that average Hong Kong rents will fall by 8% YOY in 2020, and over 13% in Central during 2020, most within H1. For occupiers wanting a Central location, now is a good time to move given recent increases in the vacancy rates. For landlords, flexibility is important. They should look at leasing incentives and discounts and target occupier sectors whose businesses are likely to remain stable despite the virus, such as insurance, biotech and pharmaceuticals," said Fiona Ngan, Head of Office Services.
"Prolonged disruption to retailers will see prime rents continue to negatively adjust in 2020. Doubling down on the challenges faced by the market, Hong Kong is also experiencing a drop in domestic consumption with citizens choosing to remain at home, utilizing online services and supermarkets. Despite these challenges, there are opportunities for international retailers to secure premises in core areas leveraging significantly adjusted rents together with landlord’s short-term rental support," said Cynthia Ng, Director, Retail Services