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News Release

Hong Kong and Macau

JLL Macau: A Stable Residential Market amid a Robust Office Sector in Macau in 2014



HONG KONG AND MACAU, 21 January 2015 – Macau’s residential and office sectors continued to recorded growth in 2014 on the back of the limited supply and the increasing number of new corporations registered in the city, while the retail property market showed signs of slowdown amid a fall in the city’s gaming revenue, according to JLL in its Macau Year-end Property Review today.

Impacted by the Central Government’s anti-corruption campaigns and the downside economy in mainland China, Macau’s gaming revenue saw a decline in 2H14.  According to the DICJ figures, Macau’s gaming revenue declined by 2.6% y-o-y to MOP 351.5 billion for 2014 as a whole.  It’s a significant plunge when comparing to the 18.6% y-o-y growth in 2013.  However, Macau’s overall GDP still registered a 13.6% y-o-y growth, totalled MOP 293.2 billion, for the first three quarters of 2014.

Underpinned by the massive development of several entertainment projects and the ongoing construction activities in Cotai, Macau’s gross fixed capital formation grew by a robust 50.6% y-o-y to MOP 44.8 billion for the first three quarters of 2014.  The private consumption expenditure also recorded a strong y-o-y growth of 11.7%, totalled at MOP 57.6 billion during the same period.

Macau’s total visitor arrivals reached 31.5 million in 2014, up 7.5% y-o-y.  Visitors from mainland China still made up the largest portion, reaching a new high of 70.5% of the total visitor arrivals.  Travellers under the Individual Traveller Scheme (ITS) accounted for 66.7% of the total number of visitors from mainland China.  At the same time, the number of visitors from Korea also saw a significant increase of 18.5% y-o-y, totalled at 507,175, for the first 11 months of 2014.

The labour market performed well in 2014.  The unemployment rate recorded at 1.7% in November 2014, while the overall median monthly income maintained at MOP 13,000 during the same period, up 8.3% y-o-y.  As of November 2014, the total number of imported workers in Macau reached a new record level of 167,272, significantly up by 23.1% y-o-y .  It is the largest increase for the number of foreign workers for one single year.  The number of imported workers is expected to grow strongly with the massive number of entertainment projects due for completion in 2015.

According to the figures announced by the DSEC, the residential deposit rose by 9.7% y-o-y to MOP 479.2 billion as of October 2014.

“Despite the consolidation of Macau’s gaming sector, Macau is undergoing a transformation in its economic structure which will be sustained by the strong inbound tourist flow.  With several large-scale projects scheduled to put into operation in 2H15, we expect Macau’s real estate market to see a healthy growth in 2015,” said Alvin Mak, Associate Director, Research at JLL Macau.

In 2014, Macau’s office sector was the most robust among all property sectors. A total of 4,407 new incorporations were registered in Macau in the first 10 months of 2014, up 24.2% y-o-y.  Most of the companies are from the wholesale & retail, construction and financial sectors, making up a total of approximately 75%.

Office supply was still very limited in Macau, with the overall office vacancy rate recorded at 6% at the end of 2014.  Located in Nam Van Lake Zone A, Fortune Business Centre (FBC) was the only new Grade A office supply in 2014.  The building was completed in 2H14, adding a total of approx. 308,807 sq ft gross of new office space to the leasing market.

In the sales market, the office sector saw a dramatic growth in capital values in 2014.  According to JLL Macau Office Index, the overall office capital values surged by 54.2% y-o-y while the Grade A office capital values rose by 54.1% y-o-y in 2014.

In the leasing market, demand mainly came from the retail and gaming sectors as well as the government departments.  There has been an increasing number of China-based developers took up office space in Macau, with a plan to expand to Hengqin.  According to JLL Macau’s Office Index, the overall office rentals rose by 61.5% y-o-y in 2014 while the Grade A office rentals saw a growth of 46.6% y-o-y.

“Despite the increased new office supply due to the completion of FBC, the overall office vacancy rate remained at the very low level of 6% though Grade A office vacancy rate rose a bit to 15%.  We expect Macau’s office sales market will maintain a stable growth in 2015, while office rental values with grow further,” said Oliver Tong, Senior Manager, Capital Markets at JLL Macau.

Macau’s retail sector continued to be active.  Backed by the strong inbound tourist sector, retail sales rose by 16.1% y-o-y to MOP 54.9 billion in the first three quarters of 2014.  However, the Chinese government’s crackdown on graft significantly slowed down the consumption by the high-rollers on luxury items.  For the first three quarter of 2014, the retail sales of watches, clocks & jewellery fell by 6.1% y-o-y, according to the DSEC statistics.

Visitor Arrivals to Macau grew by 8.4% y-o-y from January to November 2014, with visitors from mainland China grew by 15.3% y-o-y.  The per-capita spending by visitors remained stable at about MOP 2,000 during the same period.  This indicates that the increased visitor arrivals along with the ongoing consumption on mass consumer products could offset the decline in retail sales of luxury items.

Having maintained significant growth for the past 5 years, the retail property sector in Macau showed signs of slowdown, following the decrease in gaming revenue in 2014.  The high street shops in the Rua de S. Domingos area remained the most popular location for medium-class retailers to set up their footprints in Macau.  Unfortunately, the overall supply of retail spaces in this area was extremely limited which pushed up rentals to a relatively high level.  For those retailers who were more cost-sensitive, they shifted their targets to shopping malls like Circle Square, Broadway Center, Ginza Plaza and Winman Department Store where the more affordable retail spaces were available.

In the sales market, the retail property prices saw a slowdown in growth. According to JLL Macau Retail Index, the overall retail capital values rose by about 12% y-o-y in 1H14, but no significant growth was recorded in 2H14.  For 2014 as a whole, the overall retail capital values rose by 1.4% y-o-y.  Two notable retail property sales transactions were recorded in Rua de S. Domingos area in 2H14.  The properties were transacted at HKD 290 million and HKD 315 million respectively.

For the leasing market, the overall retail rentals dropped by 3.3% y-o-y in 2014.  The asking rentals of high street shops also softened, down by approx. 15%.  In 2H14, several new retailers were reported to have taken up shop space in Rua de S. Domingos area at monthly rentals from about HKD 200,000 to HKD 650,000 to open their outlets in Macau.

“With most of the new projects in Cotai are scheduled for completion in late 2015, we expect to see some of the retailers relocating or expanding to Cotai to take advantage of the more diversified tenant mix and better management in that area,” commented Oliver Tong. 

The transaction volume of Macau’s residential market reached a record-low in 2014.  According to the DSEC statistics, a total of 7,163 residential transactions were registered for the first 11 months of 2014, dramatically down by 55.8% y-o-y. This downward trend significantly accelerated in 2H14.  This was mainly attributable to the special stamp duty (SSD) and the limited new supply in the market.  On the other hand, the launch of the new residential projects in Hengqin became an alternative for properties in Macau.

New residential projects available for sale remained highly limited.  The remaining units of two major projects, Tower 3 of Nova Park in Taipa and some duplex units of One Oasis in Cotai, were launched for sale in 2H14.  Approximately 50 units of these two projects were sold.

The capital values for the high-end and mass-to-medium residential sectors grew by 19.7% y-o-y and 17.4% y-o-y respectively in 2014.  The investment yields of the high-end and mass-to-medium residential sectors recorded at 1.85% and 1.93% respectively at end 2014.

On the leasing side, the mass-to-medium residential rental values rose by 12.3% y-o-y in 2014, underpinned by the strong growth of imported workers.  The high-end residential rental values simultaneously rose by 7.1% y-o-y during the same period.
“With the strong residential deposit and the limited residential supply in the near future, coupled with the Central Bank’s interest rate cut policy, the residential sales market is expected to remain stable in 2015,” remarked Gregory Ku, Managing Director at JLL Macau.

“We are optimistic about the outlook of the residential leasing market, with several new gaming facilities scheduled for completion at end 2015,” added Ku.

Estimated Value Sector Growth in 2015:
Capital ValueRental Value
Residential high-end​Stable​+5%
Residential mass and medium​Stable​+5% to 10%
​Office​Stable​+5% to 10%
Retail​-15% to -20%​-10%