logo redirect pin user minus plus fax mobile-phone office-phone data envelope globe outlook retail close line-arrow-down solid-triangle-down facebook globe2 google hamburger line-arrow-left solid-triangle-left linkedin wechat play-btn line-arrow-right arrow-right solid-triangle-right search twitter line-arrow-up solid-triangle-up calendar globe-americas globe-apac globe-emea external-link music picture paper pictures play gallery download rss-feed vcard account-loading collection external-link2 internal-link share-link icon-close2
Hong Kong
  • Global
  • United States
  • Angola
  • Argentina
  • Australia
  • Austria
  • Bahrain
  • Baltics
  • Belgium
  • Brazil
  • Bulgaria
  • Cambodia
  • Canada
  • Chile
  • Colombia
  • Czech Republic
  • Denmark
  • Egypt
  • Finland
  • France
  • Germany
  • Greece
  • Hong Kong
  • Hungary
  • India
  • Indonesia
  • Ireland
  • Israel
  • Italy
  • Japan
  • Jordan
  • Kazakhstan
  • Kenya
  • Korea
  • Kuwait
  • Latin America
  • Luxembourg
  • Mainland China
  • Malaysia
  • Mexico
  • Morocco
  • Netherlands
  • New Zealand
  • Norway
  • Oman
  • Pakistan
  • Panama
  • Peru
  • Philippines
  • Poland
  • Portugal
  • Romania
  • Russia
  • Saudi Arabia
  • Singapore
  • Slovakia
  • South Eastern Europe
  • Spain
  • Sweden
  • Switzerland
  • Taiwan
  • Thailand
  • Turkey
  • Ukraine
  • United Arab Emirates
  • United Kingdom
  • Venezuela
  • Vietnam
English
  • English
  • 繁體中文
+852 2820 2800
Log In
  • Global Intranet
  • myCBRE
  • Services
    • Business Lines
      • Advisory & Transaction Services
      • Capital Markets
      • Global Workplace Solutions
      • Investment Management (CBRE Global Investors)
      • Property Management
      • Valuation & Advisory Services
    • Industries & Specialties
      • Office
      • Industrial & Logistics
      • Retail
      • Education
      • Food & Beverage
      • Hotels
      • Japan Desk
      • Residential
      • Sustainability
      • Flexible Workspace
    • Services for Investors
      • Capital Advisors
      • Consulting
      • Host
      • Institutional Investments
      • International Investments
      • Investment Accounting & Reporting Solutions
      • Leasing & Advisory
      • Property Management
      • Property Sales
      • Valuation & Advisory
    • Services for Occupiers
      • Enterprise Facilities Management
      • Host
      • Leasing and Advisory
      • Occupier Consulting
      • Portfolio Services
      • Project Management
      • Transaction Management
      • Valuation & Advisory
      • Workplace
  • Properties
    • Commercial Properties
      Overseas Residential Properties
  • Research & Reports
    • About Research
      Hong Kong Research Archives
      Asia Pacific Research
      Global Research Gateway
      Global Research Gateway Support
  • People & Offices
    • Leadership Team
  • About CBRE
    • Careers
      Case Studies
      CBRE Summer Internship Programme
      Graduate Training Programme
      Diversity & Inclusion
      Client Tools
      Corporate Information
      Corporate Responsibility
      Investor Relations
      Media Centre
      Asia Media Centre
      CBRE Hong Kong In the News
      Hong Kong RICS Awards 2020

Next

CBRE Launches Hong Kong 2021 Q1 MarketView
  • [CBRE HK Q319 MarketView] Review and Commentaries for Office, Retail, Industrial and Investment Sectors

[CBRE HK Q319 MarketView] Review and Commentaries for Office, Retail, Industrial and Investment Sectors

Hong Kong | October 15, 2019
  • Email
  • Share
  • Tweet
  • Share

Retail rents endure biggest fall in 21 years; office rents and investment volume also decline

 

CBRE Q3 2019 Highlights

Grade A Office
- The ongoing U.S.-China trade conflict and local sociopolitical unrest continued to weigh on leasing demand in Q3 2019. Net absorption registered just 25,400 sq. ft. while vacancy climbed 0.3% points to 6.5%.
- The weaker market sentiment ensured rents weakened across most submarkets. Overall office rents fell by 1.7% q-o-q, marking the deepest quarterly decline since Q1 2012. Greater Central was the worst performing district, with rents weakening by 2.9% q-o-q. Higher vacancy in Kowloon East also pulled down rents by 1.7% q-o-q.
- Occupiers have largely adopted a wait-and-see attitude, with many firms even delaying decisions around cost-saving initiatives including decentralisation. New commitments involving relocations to decentralised areas fell by 86% q-o-q.
- Chinese companies remained quiet. Agile space operators were relatively active, committing to 89,000 sq. ft. of additional space during the quarter.

 

Retail
-
U.S.-China trade conflict and local social unrest negatively impacted domestic consumption in Q3 2019. Retail sales fell by 17.2% y-o-y in July and August combined, setting Q3 to likely register the biggest quarterly drop since Q4 1998.
- Total visitor arrivals in July and August combined fell by 22.6% y-o-y, almost ensuring Q3 to experience the largest quarterly drop since the SARS outbreak in 2003.
- Although leasing activity was sluggish in Q3 2019 as more retailers become increasingly cautious towards expansion or relocation amid the ongoing protests, the period nevertheless saw some new leases signed by fashion and cosmetic retailers.
- Overall high street rents fell sharply by 10.5% q-o-q, the biggest quarterly contraction since Q1 1998. Shopping mall rents were flat. CBRE expects overall high street rents to decline by another 5-10% over the remainder of 2019.

 

 

Industrial
- Aggregate trade value fell by 8.1% y-o-y in July and August combined. Transshipments between the U.S. and China through Hong Kong weakened by 8.4% y-o-y over the same period after two consecutive quarterly declines. The contraction in airfreight accelerated to 9.8% y-o-y in July and August combined, which makes Q3 likely to encounter the sharpest fall since Q2 2009.
- Leasing momentum continued to slow in Q3 2019 as occupiers retained their wait-and-see approach. Occupiers with less exposure to domestic and international disputes, such as data centres and beverage logistics companies. continued to support leasing activity.
- Warehouse vacancy edged down slightly by 0.1% points to 1.6%, marking the fourth consecutive quarter that vacancy has been below 2.5%.
- Rents for ramp-access buildings rose by 1.2% q-o-q while those for cargo-lift access buildings increased 0.1% q-o-q. Overall warehouse rents grew by 0.8% q-o-q. As immediate vacancy will likely remain limited, warehouse rents are therefore expected to be stable for the remainder of 2019.

 

 

 Investment
- 
The U.S.-China trade conflict and local social unrest continued to dampen real estate investment activity in Q3 2019. Investment turnover fell by 44% q-o-q to HK$12.4 billion, the lowest quarterly total recorded since Q2 2016.
- Chinese buyers did not complete any acquisitions, marking the first time they have been absent from the market since Q4 2009. Domestic investors accounted for the bulk of purchasing activity.
- Industrial property investment was relatively resilient but less than ten deals were completed, the lowest number since Q2 2016. However, transaction volume totalled HK$4.3 billion, an improvement of 14% q-o-q over the previous quarter.
- Demand for and capital values of industrial premises will remain relatively resilient backed by positive carry and the reintroduction of the industrial building revitalisation scheme.

Commentaries

 

 

Office

Alan Lok, Executive Director, Advisory & Transaction Services – Office Services, CBRE: Hong Kong’s Grade A office leasing momentum slowed more apparently in Q3 2019. Limited sources of demand, coupled with rising availability, is set to exert downward pressure on overall rents over the next 12 months. While Tier I buildings in Central are expected to lead the rental fall, given the rental gap between non-core areas and the CBD, decentralization remains an attractive option for many occupiers. Hong Kong East particularly is expected to remain sought after by Hong Kong Island tenants who want to upgrade their office premises with lower rents. Therefore, rents in Hong Kong East will likely edge up further despite overall market sentiment.

 

 

Retail

Lawrence Wan, Senior Director, Advisory & Transaction Services – Retail, CBRE: Unlike the Occupy Central protests in 2014, the recent turmoil had a far greater impact on retailers and landlords as the protests widespread across various districts. If the current social unrest continue, the retail market is likely to suffer from a prolonged downturn. Given the present dynamics influencing the market, short-term leases and pop up stores will remain the main source of leasing activity and retailtainment-oriented outlets such as cinemas and healthcare providers could seize opportunities to lease large spaces in desirable locations in the coming months.   

 

Industrial

Samuel Lai, Senior Director, Advisory & Transaction Services – Industrial, CBRE: It was a quiet period for industrial real estate investment, with less than ten deals worth over HK$77 million completed, while investors tended to focus on assets with revitalization potential. As for leasing market, the momentum continued to slow in Q3 2019 as occupiers retained the wait-and-see approach. The lack of major new supply until 2021, coupled with the withdrawal of ageing stock under the industrial revitalization scheme 2.0 will ensure vacancy remains tight. Demands for data centers, as well as temperature-controlled warehouses for healthcare products and food and beverages remain resilient due to good industry performance while warehouse rents are expected to be stable because of festive demands.

 

Investment

Reeves Yan, Executive Director, Capital Markets, CBRE: Geopolitical tension and local social unrest will continue to negatively affect investment sentiment in the coming months. Some Chinese buyers consider to offload assets, particularly strata-titled properties and offices, to replenish liquidity for their main businesses while affluent local investors and institutional funds are eyeing potential distressed opportunities ahead of upcoming low office supply period. The low investment yield across all property sectors will encourage investors to seek value-added opportunities instead of core assets. En-bloc office buildings and industrial premises are expected to outperform.

 

Follow us on Twitter: @cbrehongkong
And on LinkedIn: company/cbre-asia-pacific

Disclaimer:

Neither CBRE nor its affiliated companies make any warranties or claims on the implied accuracy of the information contained herein.

About CBRE Group, Inc.
CBRE Group, Inc. (NYSE: CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2020 revenue). The company has more than 100,000 employees serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at https://www.cbre.com.

Media Contact

Karen-Lau_326x248-1
Karen Lau
Associate Director
Hong Kong
Marketing & Communications
+852 2820 1522
Nia-Tam-326x248
Nia Tam
Communications Manager
Hong Kong
Marketing & Communications
+852 2820 6511
  • Corporate Information
  • Corporate Responsibility
  • Media Centre
  • About Us
  • Careers
  • Case Studies
  • People & Offices
  • Leadership Team
  • Investor Relations
  • Contact Us
  • Hong Kong Privacy Policy
  • Global Web Privacy and Cookie Policy
  • Sitemap
  • Disclaimer
  • Terms of Use
  • LinkedIn
  • Twitter
  • Youtube
  • Facebook
  • Instagram
  • Wechat