Hong Kong

All districts recorded more modest rental declines compared with Q4/2020.

Designers must be adaptive to the changing times in creating spaces.

Investors and end-users are advised to leverage the price and rental corrections in the market.

Standard Chartered, DBS, Deutsche Bank and Societe Generale cut massive floor spaces.

Prime street shop and major shopping centre rents contracted by 4.9% and 4.8%, respectively. 

Meanwhile, prime building landlords are tightening up their leasing strategy.

Investments have so far reached HK$4.1bn in Q1 2021, more than 70% of the full-year 2020 total. 

Primary sales surged 165% to 1,553 units.

The French bank joins DBS in relinquishing office spaces due to growing prices in Hong Kong.

Commercial property rents are getting closer to a trough.

This translates to approximately 1.65 million square feet of vacant space.

Total surrender space rose to about 1.77 million sq ft in February.

Vacancy pressure gradually eased in most core retail areas as many short-term leases were recorded.

Blame it on the high vacancy rates. Mass projects launched were generally well received during the quarter, owing to robust pent-up demand. For example, all the 769 units and over 95% of the 1,391 units launched at Pavilia Farm (Phase 1 & Phase 2 respectively) were sold. The project sits atop Tai Wai Station and is jointly developed by New World Development and MTRC. According to JLL, with uncertainty in the economic outlook and the fact that rental markets are typically slower towards year-end, leasing activity was quiet. The situation appeared to be more notable in the high-end segment as landlords were more willing to soften asking rents to attract tenants. Up to 4,800 private supply units in 1Q21 A total of 111 luxury units are expected to have received their occupation permits in 4Q20. Notable projects include 21 Borrett Road (Phase 2) by CK Asset in Mid-levels (50 units) and Grand Homm by Goldin Financial (18 unit) in Ho Man Tin. The government has earmarked three residential sites for sale by tender in 1Q21, including one each at The Peak, Kwun Tung and Kai Tak, capable of yielding 2,240 flats in total. Together with the supply from Package 6 of the Wong Chuk Hang Station project, and private development and redevelopment sources, land supply for private housing from the quarter is estimated to reach 4,800 units. Luxury capital values decline against weak demand With demand for luxury properties staying weak, more owners were willing to reduce prices, resulting in a drop of -2.4% q-o-q in luxury capital values in 4Q20, after dropping by a similar magnitude (-2.5%) in the previous quarter. In 2020, luxury capital values dropped -8.2% y-o-y in total. Amid the holiday season and limited expatriate arrivals, leasing momentum remained weak in 4Q20, with luxury rents falling by -3.8% q-o-q, after a -3.6% q-o-q drop in 3Q20. Outlook: Drop in capital values to slow amid low interest rate A potentially less tumultuous year in 2021 and the low interest rate environment are expected to support housing demand, especially in the mass segment. We expect transaction volume for luxury properties to pick up mildly, though still remain much lower than historic levels. Given a high vacancy level, luxury capital values are still expected to remain soft, dropping in the range of 5-10% in 2021. In view of ongoing border shutdown and corporates’ focus on cost saving, expat arrivals are likely to remain low and with their housing budgets tight in the near term. Luxury rents are expected to drop by 5-10% in 2021, in line with capital values.

Its occupancy rates in its Hong Kong and Singapore properties remained high due to steady demand.

More banks and corporates are cutting their real estate footprint.