Hong Kong office, lucury homes market to grow in next 12 months

HONG KONG: Grade A office and luxury residential rentals in Hong Kong are projected to grow 20% and 15%, respectively, in the next 12 months, according to Colliers International’s Greater China Office & Residential Market Overview 2Q 2010 report which was released on July 29.

In the report, the research house said the projection was on the back of Hong Kong’s solid demand fundamentals.

“Firm occupational demand, mainly from the financial services sector, continued to buoy Hong Kong’s office market during the period between February and May 2010.

“There were also constant enquiries from a number of mainland-based companies planning to establish a presence in Hong Kong.  With a positive market absorption, the overall average vacancy rate in the market edged down from 6% in February 2010 to 5% in May 2010.  Overall, office rentals saw a growth of 8.4% quarter-on-quarter (q-o-q) to US$66.87 psm per month (RM19.8 psf) as of May 2010,” it said.

In the luxury residential market, average luxury rentals generally increased 4.7% q-o-q to US$56.48 psm per month (RM16.7 psf) as at May 2010, while the total sales transactions in traditional luxury districts of The Peak, Mid-levels and South Side decreased by 12% q-o-q during the 3-month period ended May 2010.

Notwithstanding the falling transaction volume, the average transacted price of luxury residential property experienced growth of 4.5% q-o-q to US$23,160 psm (RM6,872 psf) as of May 2010. On the leasing front, the market remained active in 2Q with more enquiries and transactions, the report noted.

Short-term traders stood on the sideline in view of the proposed new guidelines to regulate residential sales of first-hand units coupled with the government’s determination to increase residential supply, where land auctions of two sites in Ho Man Tin and The Peak were initiated during 2Q.

The report covers the office and residential markets in seven locations in the China Greater region, including Hong Kong, Beijing, Shanghai, Guangzhou, Shenzhen, Chengdu and Taipei.

The Beijing Grade A office market, meanwhile, re-established its recovery this quarter with the overall vacancy rate down by 1.85 % points q-o-q to 14.43%, while the overall net absorption nearly doubled q-o-q, to 129,175 sq m.

“Many landlords had begun adjusting their leasing strategies by shifting their focus from maintaining occupancy to optimising tenant quality and maximising rental income.  Consequently, the average rent of the Beijing Grade A office market rose by 3.92% q-o-q, the largest in the last 24 months, to RMB173.03 psm (RM7.56 psf) per month,” the report said.

In Shanghai, the Grade A office market continued to perform strongly in 2Q 2010.  As vacancy rates held steady at 12.8%. Rents increased slightly to RMB7 psm per day (32.8 sen psf), a 1.9% q-o-q increase.

“The capital value growth continued to outpace the rental growth in 2Q 2010 as the market continued to see further yield compression.  Both foreign and domestic investors continue to have a strong appetite for quality assets in China but it is unlikely that there will be any sustained periods of yield decompression in the short-to-medium term.  In other areas, significant new additions in Pudong, Huangpu, Jing’an, and Xuhui will lead to a sharp increase in vacancy rates by the end of the year, Colliers said.