Knight Frank: Bullish sentiment prevails as Hong Kong buyers snap up new projects

HONG KONG: The Land Registry of Hong Kong has recorded a total of 7,325 transactions worth HK$71.6 billion (RM38 billion) in April, mainly supported by the pent-up demand from buyers, according to Knight Frank Research (Greater China)’s monthly report in May.

The report, which focuses on Hong Kong’s office, residential and retail property markets, said the secondary market continued to reach a new height with 6,258 transactions – a rise of 6.2% month-on-month – the highest growth for over two years.

In the primary market, South Land, a newly launched project in May by Road King Infrastructure Ltd that sits atop the Wong Chuk Hang MRT Station, sold out all units in the first two batches while seven units in the second batch were sold to a single group buyer amounting to an estimated HK$200 million.

The luxury market remained resilient despite ongoing concern about the local economic recovery.

A major transaction was closed for a 5,630-sq ft unit at 90 Repulse Bay Road in Island South, which was sold for HK$467.3 million or HK$83,002 psf. Meanwhile, the last unit available at The Masterpiece in Tsim Sha Tsui was sold for HK$210 million or HK$70,731 psf.

“On the leasing front, demand was still driven by local moves amid travel restrictions, and landlords remained flexible to attract potential tenants,” it said.

Looking forward, Knight Frank noted that with the stabilisation of the Covid-19 situation in Hong Kong, along with the rising vaccination rate in the city, potential homebuyers are expected to be optimistic about the market outlook, leading to a higher transaction volume, particularly in the primary market.

Rapid growth of e-commerce driving demand for offices

Meanwhile, the prospect for office space on the island differs according to the location. In the central business district located in the Central District, the vacancy rate of Grade A office remained at 7.9% in both March and April while the vacancy rate of office space in non-core business areas like Wanchai and Causeway Bay continued to grow to 12.4% and 7.5% respectively.

The prospect of office space has also benefited from the rapid growth of e-commerce during the pandemic as many shoppers have to go online.

“Some key players in the luxury fashion platforms have been actively looking for larger floor space and to upgrade building specifications to incorporate their back office, show rooms and customer service centres at an affordable rent,” according to the report.

“Island East remains an attractive location for multinational corporations looking for sizeable office space. For instance, Swiss Bank Julius Baer, a Swiss wealth management group, leased 91,800 sq ft in Two Taikoo Place. We expect Island East to continue to benefit from the decentralisation trend and to maintain a stable vacancy rate and rental level for the rest of the year.”

Over in the mainland of Hong Kong, Kowloon was seeing more tenant enquiries, coupled with frequent site inspections. Most leasing activities were in Kowloon East as tenants saw the decreasing rental level as an expansion opportunity with attractive terms.

Retail: Diversification of tenant mix

Hong Kong’s retail market, on the other hand, saw landlords of prime shopping malls and street shops exploring new leasing strategies to diversify the tenant mix, with introduction of new elements targeting local consumers.

Recently, Hang Seng Bank took over an Adidas-vacated space in Queen’s Road Central at a deep discount. The bank rented two floors totalling 6,500 sq ft for HK$1.2 million per month. This reflected the ongoing reshuffling of tenants in prime shopping streets.

“Retailers remained hesitant towards expansion but service trades such as banks, which used to be expelled from core areas in the last 15 years, are taking the opportunity now,” said the report.

Knight Frank commented that rental concessions are likely to taper off in the next few months due to the partial recovery of retail sales.

“According to the Census and Statistics Department, total retail sale value rose by 20.1% year-on-year (y-o-y) to HK$27.6 billion in March, slower than the 30% y-o-y increase in February.”   

This story first appeared in the E-weekly on June 18, 2021. You can access back issues here.

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