Office rents in Hong Kong’s Central district to plunge by up to 40%
January 21, 2020 Category China News Round-up, Weekly
Office rents in Hong Kong’s Central district, the world’s most expensive commercial property market for a fourth straight year in 2019, might plunge by up to 40% by 2022, according to Harry Tan, head of research for Asia-Pacific at London-based real estate investment manager Nuveen Real Estate. “Central office rents have started to decline given the recent weak sentiment, and this will persist, especially as businesses readjust their expectations of Hong Kong’s long-term outlook, and reassess the need to diversify away from the city.”
The Nuveen forecast was the most pessimistic in an industry gripped by gloom, as seven months of unprecedented political crisis have sent Hong Kong’s economy into its first technical recession in a decade. Commercial property rents and purchase prices might drop by 10% on average this year, according to a survey by the South China Morning Post of 10 property analysts. JLL, the world’s second-largest commercial real-estate services firm, expected rent and prices to drop by 20%. The U.S.-China trade war has added to Hong Kong’s woes, as global trading companies and providers of professional services deferred their expansion plans, crimping demand for additional office space. Mainland Chinese companies, in particular, have been noticeably reticent about paying high rents in Central, analysts said.
“Central offices will also continue to face the decentralization pressure of businesses relocating. Overall take-up is likely to stay soft, driving rents lower,” Tan added. The phase one trade deal between Washington and Beijing will not improve the situation. “The trade deal will bolster growth sentiment globally, and will help support business conditions in Hong Kong from further deterioration, but the overriding weakness in occupier demand will continue to drive rents lower,” Tan said. The estimated decline in rents is also likely to put pressure on the sale prices of commercial real estate in Hong Kong, although at a more limited scale of between 10% and 15%, according to Nuveen, as reported by the South China Morning Post.
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