Thought Leadership

• Commercial real estate investment totalled HK$19.2 billion in Q3 2021, a decline of 31% q-o-q. However, the Q2 2021 total was skewed by one very large transaction.
• Industrial buildings remained keenly sought-after, with HK$7.9 billion-worth of industrial assets changing hands this quarter, the highest of any sector. Five of the ten largest deals completed in Q3 2021 involved industrial properties.
• The period saw stronger demand for office properties. While no en-bloc deals were signed, several office floors were transacted in both the CBD and in decentralised locations. Office capital values edged up by 0.3% q-o-q, their first quarterly growth since Q3 2018.
• In addition to transactions for street shops in neighbourhood areas, the quarter saw a few eye-catching sales in traditional retail districts.
• Local investors turned more active in Q3 2021, accounting for 32% of investment volume, the highest among all buyer categories.

This article was originally published in https://www.cbre.com/

• The trade environment continues to strengthen. High freight forwarding costs mean traders are looking to utilise more warehouse space to protect margins.
• Ongoing power shortages in mainland China highlight the risk of weaker export growth, which could drag on logistics demand in the near term.
• While leasing demand remained strong in Q3 2021. reduced space availability led to a drop in leasing volume compared with the previous quarter.
• Retail and F&B-related occupiers drove demand, while tech and telecom firms were also observed to be seeking space.
• Retailers are expected to become more proactive in securing both retail and warehouse space in the coming months as fundamentals improve.
• A further decline in warehouse vacancy underpinned steady rental growth in Q3 2021.
• With space availability set to remain for longer, further rental growth in expected over the next 6-12 months.

This article was originally published in https://www.cbre.com/

• The government’s introduction of consumption coupons underpinned stronger retail sales growth in August, reversing the trend of slower m-o-m growth witnessed since the start of the year.
• Leasing sentiment improved over the quarter, with demand being driven by casual wear, sporting goods and F&B retailers.
• Central saw several major commitments by a range of retail trades and for a variety of lease durations and purposes.
• The expiry of several short-term leases ensured overall vacancy edged up in Q3 2021.
• Both high street shop and shopping centre rents were stable over the quarter.
• While rents are expected to rise steadily in the coming months, a sharp uptick is not expected until luxury and other premium retailers resume expansion along high streets.
• Stronger rental growth will materialise in 2022 should cross-border travel normalise by early next year.

This article was originally published in https://www.cbre.com/

• Net absorption stood at -119,000 sq. ft. in Q3 2021, the eighth consecutive quarter of negative net absorption since the current market downcycle commenced in mid-2019. This downcycle is now the longest and deepest in the city’s history.
• However, the magnitude of negative net absorption continued to moderate from previous quarters thanks to an uptick in new leasing volume.
• Overall vacancy increased over the quarter, with pressure more prominent in Wan Chai/Causeway Bay and Hong Kong East. Vacancy fell in Kowloon East and was stable in Greater Central.
• While still limited, leasing demand was broad based and from a range of industry sectors. Most new leases involved relocation, with several downsizing moves also observed. Chinese firms remained relatively quiet.
• Stronger leasing momentum ensured the rental decline moderated in Q3 2021, with three of the city’s five major submarkets seeing rents fall by less than 1% q-o-q. Rents are expected to edge down further over the next 12 months.

This article was originally published in https://www.cbre.com/