Hong Kong’s property market to see uneven recovery in 2H2021
Decline in office and retail markets nearing the end, residential and industrial markets recover
HONG KONG, 14 July 2021 – Hong Kong’s property market began to see the silver lining in the first half of this year following the COVID-19 outbreak and social tensions over the last two years. More moderate declines in rents and capital values were recorded in the commercial property markets, while prices and rents of residential and industrial properties rebounded. The uneven recovery in the real estate market is expected to continue in the second half of 2021, according to JLL’s Mid-year Property Market Review and Forecasts released today.
Despite a higher level of leasing activities, Grade A office rents are still expected to correct mildly in the second half while investment activities will stay subdued. The residential and industrial markets are showing signs of recovery. Rents and capital values of high street shops are expected to rebound.
The Grade A office leasing market improved in the first half of 2021. The market recorded a net withdrawal of 518,400 sq ft during the period, after the unprecedented level of net withdrawal of 2.7 million in 2020. Net withdrawal was recorded in all major office submarkets, except Kowloon East, in the first half of 2021.
It led to the overall vacancy rate increasing to 9.5% at the end of June, the second highest level since the end of April 2004. The vacancy rate in Central was relatively stable in the first half of 2021, while Tsimshatsui experienced the most substantial hike.
The overall Grade A office rents dropped 4.7% in the first half of 2021. The fall in rents has moderated compared with the fall of 6.6% in the second half of 2020. This was most obvious in Central’s office market: its rents were relatively resilient and fell only 3.2% year-to-date.
Alex Barnes, Head of Agency Leasing at JLL in Hong Kong, said: “Looking forward, we believe the gross leasing volume to improve in the second half of 2021. However, the market will continue to record net withdrawal during the period due to the considerable amount of marketable space to be made available in the next six months. It will drive the vacancy rate higher.”
“Despite rents continuing to face downward pressure, the initial phase of sharp rental corrections is behind us and rentals will drop mildly by 0-5% in the second half of this year. We expect to see rents bottoming out in the coming 12 months,” he added.
|Hong Kong Grade A Office Indicator – % Change|
|Submarket||Rent (1H2021)||2H2021 Rental Forecast|
|Hong Kong East||▼5.1%||▼0-5%|