Press Release
Anticipated Rate Cut Sparked Improved Sentiment
CBRE launches Hong Kong 2024 Q3 Market Review
October 7, 2024
Media Contact
Christine Tai
Associate Director, Marketing & Communications, Hong Kong
Hong Kong’s economy experienced modest growth despite local and global challenges including slowdown in consumption spending and tighter credit conditions. The anticipated rate cut in September has also sparked improved sentiment in the commercial real estate market towards the end of the quarter, according to CBRE Hong Kong’s 2024 Q3 Market Review.
“The long-awaited rate cut, along with China’s significant monetary easing policy, has sent an encouraging signal to the market and improves Hong Kong’s business sentiment towards the end of Q3 2024. During the quarter, commercial real estate investment demand remains thin despite transaction volume improved q-o-q from the low levels registered in Q2 2024. Leasing sentiment improved in the office sector, while retail and industrial leasing activities have remained stable yet slower. The World Bank recently recognized Hong Kong as one of the top ten performers among 50 economies worldwide, particularly in international trade and business entry. Coupled with the possibility of further interest rate cut and monetary easing in Mainland China, we foresee further enhancement in market confidence in the next one to two quarters.” said Marcos Chan, Executive Director, Head of Research, CBRE Hong Kong.
Review and Commentaries
Grade A Office
Ada Fung, Executive Director, Head of Advisory & Transaction Services, CBRE Hong Kong: “The year-to-date leasing momentum continued to improve from 2023 although office occupiers remain in cost cautious mode. The quarter saw selective Mainland Chinese firms making decisions to relocate, but overall new and expansion demand remains limited. Lower interest rates and China’s monetary easing will likely help fuel improved demand for office space should both China’s and Hong Kong’s economy continues to cover. We expect leasing activities to become more active as the market has a greater clarity on the economic outlook in 2025. While overall vacancy improved marginally quarter-on-quarter, it remains at historically high levels. High vacancy rates and new supply are likely to continue driving rents downward in the short term.”
Retail
Lawrence Wan, Senior Director, Head of Advisory & Transaction Services – Retail, CBRE Hong Kong: “Despite continued retail sales declines for six consecutive months, quarter-on-quarter leasing momentum in core districts recovered slightly in Q3 2024. We observed renewed demand from international fashion brands that had been quiet since the pandemic. Vacancy levels remained unchanged from Q2 2024 at single-digit levels, leading to steady and mild rental growth on high streets during the quarter. Currently, high-street shop rents are approximately 35% lower than their peak in 2019. The commencement of an interest rate downcycle will likely translate into higher disposable income and improve household affordability while potential weakening of the Hong Kong Dollar will benefit tourist consumption in Hong Kong. We believe Hong Kong’s retail demand will continue to improve in the next few quarters.”
Industrial
Samuel Lai, Executive Director, Head of Advisory & Transaction Services – Industrial & Logistics, CBRE Hong Kong: "During the quarter, we noticed a softened momentum in industrial leasing. However, the trade business environment has continued to improve in recent quarters, with year-on-year business receipt growth across the trade and logistics industries. Notably, 63% of the year-to-date leasing volume was contributed by logistics firms. As global interest rates begin to come down, business momentum will improve and benefit the world’s aggregate trade. China’s continuous economic recovery will also warrant trade flow and lend support to Hong Kong’s logistics industry. Warehouse demand is expected to gather momentum in the following quarters.”
Capital Markets
Reeves Yan, Executive Director, Head of Capital Markets, CBRE Hong Kong: “We are seeing increased interest in big-ticket deals in the market following the start of the rate cut, coupled with deeper price discounts, end-users and long-term investors are gaining confidence to enter into buying positions. Further rate cuts and monetary easing in the Mainland China economy will possibly translate into stock market rally and improve investment market sentiment in the few months ahead. Transaction volume will likely further improve in Q4 2024 and extend into 2025. Capital values, however, will take longer to improve as supply overhang in some property sectors and negative carry will prevent a sharp jump in price trends.”
“The long-awaited rate cut, along with China’s significant monetary easing policy, has sent an encouraging signal to the market and improves Hong Kong’s business sentiment towards the end of Q3 2024. During the quarter, commercial real estate investment demand remains thin despite transaction volume improved q-o-q from the low levels registered in Q2 2024. Leasing sentiment improved in the office sector, while retail and industrial leasing activities have remained stable yet slower. The World Bank recently recognized Hong Kong as one of the top ten performers among 50 economies worldwide, particularly in international trade and business entry. Coupled with the possibility of further interest rate cut and monetary easing in Mainland China, we foresee further enhancement in market confidence in the next one to two quarters.” said Marcos Chan, Executive Director, Head of Research, CBRE Hong Kong.
Review and Commentaries
Grade A Office
- Gross leasing volume fell 16% quarter-on-quarter to 993,000 sq. ft. in Q3 2024, bringing year-to-date volume to 3.6 million sq. ft., 89% of the full-year 2023 total. Leasing requirements remained small with just 7% of deals this quarter exceeding 10,000 sq. ft., the smallest proportion since Q3 2013.
- Q3 2024’s net absorption totalled 125,400 sq. ft., staying positive for a fifth consecutive quarter. Greater Central recorded 52,100 sq. ft. of net absorption, partly driven by improved occupancy in Cheung Kong Center II.
- The lack of new supply combined with positive net absorption pulled down the overall vacancy rate by 0.1 percentage point to 16.8%, marking the second quarterly decline since Q1 2019.
- The vacancy overhang ensured rents declined for the 21st consecutive quarter, dropping 2.6% quarter-on-quarter. This represented a sharper decline from the -1.6% quarter-on-quarter fall seen in the preceding quarter, bringing the year-to-date decline to 4.7%. Greater Central rents dropped 2.8% quarter-on-quarter due to vacancy pressure in new stock. Negative net absorption saw overall rents in Kowloon East drop 4.7% quarter-on-quarter, accelerating from -2.2% quarter-on-quarter in Q2 2024, also the sharpest fall since Q3 2020.
Ada Fung, Executive Director, Head of Advisory & Transaction Services, CBRE Hong Kong: “The year-to-date leasing momentum continued to improve from 2023 although office occupiers remain in cost cautious mode. The quarter saw selective Mainland Chinese firms making decisions to relocate, but overall new and expansion demand remains limited. Lower interest rates and China’s monetary easing will likely help fuel improved demand for office space should both China’s and Hong Kong’s economy continues to cover. We expect leasing activities to become more active as the market has a greater clarity on the economic outlook in 2025. While overall vacancy improved marginally quarter-on-quarter, it remains at historically high levels. High vacancy rates and new supply are likely to continue driving rents downward in the short term.”
| Grade A Office | Q1 2024 | Q2 2024 | Q3 2024 | Q1 2024* | Q2 2024* | Q3 2024* | 2024F |
| Net Absorption (Sq. ft.) | Rental Change (%) | ||||||
| Overall | 654,200 | 348,300 | 125,400 | -0.6% | -1.6% | -2.6% | -5-10% |
| Greater Central | -48,200 | 10,200 | 52,100 | -1.0% | -0.8% | -2.8% | -5-10% |
| Wanchai, Causeway Bay |
249,900 | 7,900 | -33,800 | -0.6% | -1.0% | -1.9% | -5-10% |
| Hong Kong East | 71,600 | -12,700 | 1,300 | -1.2% | -2.8% | -2.3% | -5-10% |
| Tsim Sha Tsui | 55,600 | -800 | 73,300 | 0.3% | -3.3% | -1.4% | -5-10% |
| Kowloon East | 233,300 | 183,300 | -81,100 | -0.6% | -2.2% | -4.7% | -5-10% |
(*) q-o-q
| Grade A Office | End-Mar 2024 |
End-Jun 2024 |
End-Sep 2024 |
2023 | 2024F |
| Vacancy (%) | New Supply (sq. ft.) | ||||
| Overall | 16.7% | 17.0% | 16.8% | 1.6 mil. | 1.7 mil. |
| Greater Central | 11.7% | 13.3% | 13.1% | N.A. | N.A. |
| Wanchai, Causeway Bay |
11.9% | 11.8% | 12.2% | N.A. | N.A. |
| Hong Kong East | 14.8% | 14.9% | 14.9% | N.A. | N.A. |
| Tsim Sha Tsui | 13.2% | 13.2% | 12.5% | N.A. | N.A. |
| Kowloon East | 20.8% | 20.7% | 21.1% | N.A. | N.A. |
Retail
- Leasing momentum improved slightly in Q3 2024 despite weaker retail sales. Following a decline of 11.9% year-on-year in Q2 2024, total retail sales dropped 10.9% year-on-year in July and August combined, bringing the decline in the first eight months of this year to -7.7% year-on-year.
- F&B groups contributed only 22% of leasing volume in Q3 2024, compared to 52% in Q2 2024. Fashion brands accounted for 20%, making them the second largest contributor of leasing demand.
- High-street shop vacancy remained unchanged at 6.8%. Vacancy in Central dropped by 1.3 percentage point to 7.9% while vacancy in Causeway Bay increased 1.4 percentage point to 5.3%. Vacancy in Tsim Sha Tsui and Mong Kok held steady at 8.7% and 6.3% respectively.
- The single-digit vacancy rate continued to underpin steady growth in high-street shop rents, which grew by 1.0% quarter-on-quarter in Q3 2024, the same pace as in Q2 2024
.
Lawrence Wan, Senior Director, Head of Advisory & Transaction Services – Retail, CBRE Hong Kong: “Despite continued retail sales declines for six consecutive months, quarter-on-quarter leasing momentum in core districts recovered slightly in Q3 2024. We observed renewed demand from international fashion brands that had been quiet since the pandemic. Vacancy levels remained unchanged from Q2 2024 at single-digit levels, leading to steady and mild rental growth on high streets during the quarter. Currently, high-street shop rents are approximately 35% lower than their peak in 2019. The commencement of an interest rate downcycle will likely translate into higher disposable income and improve household affordability while potential weakening of the Hong Kong Dollar will benefit tourist consumption in Hong Kong. We believe Hong Kong’s retail demand will continue to improve in the next few quarters.”
| High Street Shops in Core Districts |
End-Mar 2024 |
End-Jun 2024 |
End-Sep 2024 |
| Vacancy (%) | |||
| Overall | 6.6% | 6.8% | 6.8% |
| Central | 6.6% | 9.2% | 7.9% |
| Causeway Bay | 5.3% | 3.9% | 5.3% |
| Tsim Sha Tsui | 5.8% | 8.7% | 8.7% |
| Mong Kok | 7.4% | 6.3% | 6.3% |
| Retail | Q1 2024* | Q2 2024* | Q3 2024* | 2024F | 2023 | 2024F |
| Rental change (%) | New Supply (sq. ft.) | |||||
| High Street Shops | 2.7% | 1.0% | 1.0% | +0-5% | N.A. | N.A. |
| Prime Shopping Malls | 2.3% | Flat | 2.0% | +0-5% | 3.0 mil. | 3.8 mil. |
(*)q-o-q
Industrial
- Aggregate trade rose 9.3% year-on-year in July and August combined, bringing the year-to-date total to HK$6,130 billion, around 70% of last year’s total value. Should this trend continue for the next four months, full-year aggregate trade should go beyond last year’s total. Container throughput fell by 6.8% year-on-year while airfreight performed better, rising 12.5% year-on-year.
- Leasing momentum weakened further in Q3 2024 as landlords provided concessions for lease renewals. The biggest deals involved SF Supply Chain leasing 137,400 sq. ft. in Mapletree Fanling Warehouse and 97,800 sq. ft. in Smile Centre, also in Fanling.
- Warehouse vacancy rose 0.47 percentage point to 8.4% mainly due to increased vacancy in Tsuen Wan, Tuen Mun, Yuen Long and Shatin.
- Landlords’ greater focus on maintaining occupancy over rents ensured warehouse rents continued to fall, dropping by 1.0% quarter-on-quarter, only the third quarter-on-quarter decline since Q4 2020.
Samuel Lai, Executive Director, Head of Advisory & Transaction Services – Industrial & Logistics, CBRE Hong Kong: "During the quarter, we noticed a softened momentum in industrial leasing. However, the trade business environment has continued to improve in recent quarters, with year-on-year business receipt growth across the trade and logistics industries. Notably, 63% of the year-to-date leasing volume was contributed by logistics firms. As global interest rates begin to come down, business momentum will improve and benefit the world’s aggregate trade. China’s continuous economic recovery will also warrant trade flow and lend support to Hong Kong’s logistics industry. Warehouse demand is expected to gather momentum in the following quarters.”
| Industrial & Logistics | Q1 2024* | Q2 2024* | Q3 2024* | 2024F |
| Rental Change (%) | ||||
| Warehouse | -1.1% | -1.5% | -1.0% | -0-5% |
| Flatted Factories | -0.8% | -1.0% | -1.5% | N.A. |
| Industrial/Office | -1.2% | -0.7% | -1.5% | N.A. |
(*)q-o-q
| Industrial & Logistics | End-Mar 2024 |
End-Jun 2024 |
End-Sep 2024 |
2023 | 2024F |
| Vacancy | New Supply (sq. ft.) | ||||
| Warehouse | 5.5% | 7.9% | 8.4% | 4.3 mil. | 0 |
Capital Markets
- Hong Kong’s banks responded to the first U.S. interest rate cut in four years by reducing their Best Lending Rate by 25bps to 5.625%-5.750%. The one-month HIBOR remained high despite falling from 4.61% at end-June to 4.32% as of 30 September 2024.
- Commercial real estate investment volume (deals worth over HK$77 million) slowed with just 25 transactions. Most deals were smaller sized, with 15 transactions involving a lump sum of less than HK$300 million. Deep negative carry continued to constraint investment momentum over the quarter.
- By considerations, investment volume improved by 22.6% quarter-on-quarter to HK$9.97 billion this quarter, bringing year-to-date investment volume to HK$33.8 billion, up 28.6% year-on-year. This, however, is the 2nd lowest year against the same periods since 2008.
- Financially stressed assets accounted for HK$5.5 billion of investment volume, representing 55% of this quarter’s total, as pressure continued to mount on sellers to fulfil loan covenants.
Reeves Yan, Executive Director, Head of Capital Markets, CBRE Hong Kong: “We are seeing increased interest in big-ticket deals in the market following the start of the rate cut, coupled with deeper price discounts, end-users and long-term investors are gaining confidence to enter into buying positions. Further rate cuts and monetary easing in the Mainland China economy will possibly translate into stock market rally and improve investment market sentiment in the few months ahead. Transaction volume will likely further improve in Q4 2024 and extend into 2025. Capital values, however, will take longer to improve as supply overhang in some property sectors and negative carry will prevent a sharp jump in price trends.”
| Investment | Q1 2024 | Q2 2024 | Q3 2024 |
| Total Investment Volume (HK$ mil.)# | |||
| Overall# | 15,654 | 8,136 | 9,975 |
| Office | 7,986 | 3,932 | 4,247 |
| Retail | 4,683 | 961 | 2,991 |
| Industrial & related | 901 | 990 | 2,050 |
| Hotel & related | 320 | 1,220 | 180 |
| Miscellaneous | 1,765 | 1,034 | 507 |
(#) property transactions >USD 10 mil, excl. govt and private land transactions.
| Investment | Q1 2024* | Q2 2024* | Q3 2024* | 2024F |
| Capital Value Change (%) | ||||
| Grade A Office (Stratified buildings only) |
-2.0% | -4.3% | -8.0% | -10-15% |
| High Street Shops in Core Locations |
2.0% | -1.0% | Flat | +0-5% |
| Warehouse | -1.1% | -1.5% | -1.0% | -0-5% |
(*)q-o-q
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 and a premier provider of critical infrastructure services (based on 2025 revenue). The company has more than 155,000 employees (including Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves clients through four business segments: Advisory (leasing, sales, debt origination, mortgage servicing, valuations); Building Operations & Experience (facilities management, property management, flex space & experience, data center solutions); Project Management (program management, project management, cost consulting); Real Estate Investments (investment management, development). Please visit our website at www.cbre.com.
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 and a premier provider of critical infrastructure services (based on 2025 revenue). The company has more than 155,000 employees (including Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves clients through four business segments: Advisory (leasing, sales, debt origination, mortgage servicing, valuations); Building Operations & Experience (facilities management, property management, flex space & experience, data center solutions); Project Management (program management, project management, cost consulting); Real Estate Investments (investment management, development). Please visit our website at www.cbre.com.