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News Release

Hong Kong and Macau

Jones Lang LaSalle: Hong Kong Property Market Remains Cautious


Despite recent improvements, market sentiments weighed down by the macroeconomic environment, landlords and investors are likely to take cautious approach towards the property market, from residential, retail, Grade A office to warehouse sectors, notes Jones Lang LaSalle in its latest Asia Pacific Property Digest.

Residential Market
Banks in Hong Kong were more willing to facilitate mortgage financing and adopted more lenient mortgage valuations in the first quarter of 2009 than in the previous quarter. These helped trigger end-user buying demand in the mass and high-end residential property markets.
 
The volatility in the stock market and low interest rates for savings accounts caused investors to turn to residential properties for more stable investments. Sales activity in both the primary and secondary markets recorded pickups in the first quarter, with the number of residential sale-and-purchase agreements rising by 29.8% q-o-q in the quarter to 16,464 units.
 
Retail
Retailers were increasingly becoming cautious towards expansions; however, some mass market F&B operators and cosmetics shops remained active in looking for space. Beginning 1st April, eligible Shenzhen permanent residents (about 2.2 million in numbers) will be allowed to apply for year-round multiple-entry visas to Hong Kong. The inbound tourism market is expected to bring additional momentum to Hong Kong’s consumption market.
 
The retail market is expected to experience a slowdown due to a weaker local consumer confidence. Rents will trend down further to justify the softer demand and retailers’ tighter profit margins.
 
Grade A Office
The leasing market was highlighted by several notable leasing transactions in the core market during the first quarter of 2009. These include The Executive Centre leasing 42,720 sq ft (net) in Two Exchange Square, Standard Chartered Bank leasing 37,970 sq ft (lettable) in Two International Finance Centre and Sony International leasing 47,560 sq ft (gross) in the Gateway Tower 1. Lower rentals and the higher quality of Grade A office buildings in Kowloon East continued to attract the interests of larger occupiers.
 
However, these lettings were offset by returning stock from the expiring leases of several larger relocated tenants, resulting in negative net take-up of about 356,600 sq ft (net) in the overall market during the quarter.

‘In view of the global economic outlook, most companies are expected to remain focused on consolidation and in reducing costs rather than growth. Leasing activities are likely to be underpinned by relocations driven by costs,’ remarks Marcos Chan, Jones Lang LaSalle’s Head of Research for Greater Pearl River Delta.
 
Industrial – Warehouse
Leasing demand for warehouses in the industrial property market segment was relatively less affected, although it has been slowing down since the first quarter of 2009. Activity was mainly driven by downsizing and relocation for cost-saving purposes. Some logistics providers and traders chose to consolidate their operations under one roof to enhance operational efficiency and for better space quality.
 
Even though most of the quality warehouses in Hong Kong are under concentrated ownership, the weakened demand will likely drive rentals downward. Landlords will focus on retaining occupancy by offering lower rentals and more favourable options to both existing and new tenants. ‘Warehouse rents are set to trend down further in the remainder of 2009,’ Chan concludes.