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A market for occupiers to be resilient and ambitious

Since before the start of 2020, Hong Kong’s real estate had been operating with caution embedded into its local and global decision-making processes. A flow of continuous challenges have tested the resolve and operating process of the market which include China’s economic slowdown, US-China trade tensions and social unrest that pushed the city into an economic downturn; this was all before we heard of COVID-19.

This crescendo of events has had a far-reaching impact on Hong Kong’s Grade A office leasing stakeholders. Occupiers have focused on being resilient to ensure stability, landlords have become flexible to focus on occupier retention and investment activity has slowed despite it being a sector that has still seen some reasonable level of return.

Kowloon East experiences positive net take-up in Q3

Office leasing activity has taken a hit globally, not just locally. Lockdowns and working from home have caused issues for occupiers and landlords alike, but for Hong Kong its compounded a difficult period which has taken the wind out of the sails of the overall Grade A office market which witnessed its fifth consecutive quarter of negative net take-up of (-539,214 sq. ft.). The only sub-market to record a positive net take-up was Kowloon East (+114,914 sq. ft.).

This year’s market activity can be characterised by the overall market and CBD rents which we forecast will fall by 17% YoY and 20% YoY, respectively. We do see some stabilisation from Q2 2021 with clear recommendations for occupiers to use a blend and extend strategy, negotiating lower rents in the City’s CBD (Central and Admiralty) for longer-term commitments.

The market’s decline has created an occupier-centric focus with surrender stock becoming more readily available to renew, or even upgrade with performing industries like private banking, wealth management and insurance firms looking to capitalise. To stimulate interest, landlords have been more flexible by offering attractive lease terms to existing occupiers with an aim to retain; an easier strategy than finding a new tenant.

Rental correction underpinned by geopolitical tension

Hong Kong and in particular Central are well documented for their high-priced real estate market. However, continued growth has gone unchecked for some time and occupiers and investors have been waiting for a meaningful correction. The fundamentals of Hong Kong have always ensured demand and prices stay strong and bounce back quickly if there is market downturn.

Stakeholders are closely watching the market go through a much-needed correction which has the potential to improve Hong Kong’s competitiveness and financial sustainability. For example, creating feasibility for occupiers to expand their operational footprint at more favourable rental rates especially when the market begins to recover.

An undertone throughout this timeline is the geopolitical tension (which may twist again now there is a new President Elect) between the US and China. For Hong Kong, this is starting to favour the gateway city as the potential de-listing of Chinese firms on the US stock exchanges has created an opportunity to attract new and secondary listing opportunities.

This threat of de-listing is elevating Hong Kong’s status as the go-to financial centre in Asia especially for Initial Public Offerings (IPO) with its pipeline growing substantially; opening its arms to a potential 20+ eligible US-listed Chinese firms. There isn’t an expectation for this to instantly translate into revenue, but there is opportunity for supporting financial service companies such as investment bankers, lawyers and accountants to benefit in terms of new business, stimulating future growth and stability.

To find out more about the market’s latest insights and recommendations, download Colliers Q3 Quarterly Update today.


相關專家

Fiona Ngan

Head of Office Services

Office Services

香港

簡介

高力國際總經理 - 顏慧萍小姐是香港及九龍商業物業服務主管。她在此領域已經超過 26 年經驗,她憑藉深厚的專業知識和市場經驗,多年來為各行各業的租戶和大業主提供全面的物業方案,成績有目共睹。不論是在歷史悠久的香港商業區,抑或是在新冒起的九龍區,她也能因應客戶需要物色理想據點,實現業務上的鴻圖大計。

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