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Across the office and retail sectors, landlords have become more flexible and are open to negotiation to secure longer and preferable lease terms. The Hong Kong Market Outlook 2021 hinted at softer leasing momentum but anticipated the office sector would bottom out by Q2 with retail experiencing an uptick from the low base experienced in 2020.
As we approach the end of first quarter, we hear from two of our leading brokers, Cynthia Ng, Retail Services and Ivan Wong, Office Services, on what key movement they are seeing in the market on the ground, and how that compares to the forecasted Market Outlook.
Lifestyle fashion retailers are leveraging adjusted rental rates to expand their presence on tier one high streets, in core retail locations. For instance, American fashion clothing retailer American Eagle has leased a new location at 31-31A Queen's Road Central, taking a duplex over the ground and first floor of LHT Tower, which includes a portion of the ex-GAP space.
Looking forward, we expect to see more lifestyle trades capture local consumption and expand, which includes supermarkets, approachable modern dining concepts, athleisure fashion, and home living brands. Neighbourhood malls will continue to perform well as consumers spend more time in rural areas and neighbourhood locations. It’s not anticipated that there will be a significant change in rental rates or sales in Hong Kong’s retail sector throughout the remainder of the year. However, the introduction and rollout of a successful vaccine programme and the re-opening borders have the potential to impact the market but it’s dependent on timing.
Post Chinese New Year, we witnessed an increase in the level of leasing activity and transactions across the market amidst a softened environment. This continued sentiment is providing greater flexibility and options for occupiers to flex their real estate strategies in line with changes to the needs of the office space. For instance, in Tsim Sha Tsui and Kowloon East, occupiers in the technology sector were able to identify excellent solutions and work with landlords of strong branded portfolio buildings, offering attractive rental packages.
The lifted vacancy rate in core districts also allows occupiers to explore opportunities to re-centralise their footprint from non-core areas and consider re-brand opportunities as landlords are showing greater flexibility and more negotiable. It’s expected to see more re-centralisation leasing in the upcoming quarters.
If you would like to know more about the market, or what options face you as a real estate professional or occupier in Hong Kong, don’t hesitate to contact our experts to see how we can help accelerate the growth of your business.