Hong Kong's property market on the cusp of full recovery in 2022
Retail properties poised to record strongest rental and capital value growth
HONG KONG, 09 December 2021 – Hong Kong's residential and industrial sectors have overcome the capital value corrections this year and the whole property market is on the cusp of full recovery in 2022 as the pandemic situation is contained, according to JLL's Year-end Property Market Review and Forecasts released today. However, JLL expects the recovery to be moderate.
(Left to right) Oscar Chan, head of capital markets, Jeannette Chan, senior director of retail, Joseph Tsang, Chairman in Hong Kong, Alex Barnes, head of agency leasing
Highlights of the report:
- Overall Grade A office rents are expected to rise 0-5% in 2022, despite the vacancy rate edging higher owing to considerable supply
- Central's Grade A office rents are expected to rise 5-10% in 2022, the strongest among the major office submarkets
- Retail rental correction has reached the cyclical bottom
- Rents of High Street shops and Prime shopping centres are expected to rise 5-10% and 0-5% respectively in 2022
- The Northern Metropolis is estimated to require an additional 400 million sq ft GFA of residential development
- Residential capital values are expected to rise 0-5% in 2022
- Investors will eye on hotels and aged buildings with redevelopment potential next year
- Capital value growth in High Street shops shall be most visible amongst different property classes in the coming year
Net absorption in the overall Grade A office market was -643,400 sq ft over the first 11 months of 2021, but the majority was recorded in the first half of the year. There were more instances of expansion in recent months, while some tenants retracted the intention to surrender their office premises, signifying improving market sentiment.
The overall vacancy rate was 9.6% at the end of November, dropping from the recent peak of 9.8% at the end of September.
Rental decline moderated further across all major office submarkets in the second half of the year. Central's office rents rebounded 1.2% during the period after falling 3.2% in the first half of 2021. It is the only submarket to record rental growth during the period, mainly driven by robust occupier demand for premium office space in the central business district.
Alex Barnes, Head of Agency Leasing at JLL in Hong Kong, said: "We believe the office market has entered the last phase of the current down cycle and is on the cusp of recovery in the near future. Gross leasing volume will continue to improve next year as more tenants reconfigure their real estate requirements. The resumption of normal traveller clearance, with mainland China at first, is going to support the recovery of the office sector,”
"However, the vacancy rate will edge higher as there will be a considerable amount of new office supply slated for completion in 2022. We expect the overall office rents will rise 0-5% next year," he concluded.
Hong Kong Grade A Office Indicator – % Change
|Submarket||2021 Rental Values*||2022 Rental Forecast|
|Hong Kong East||▼7.4%||▼0-5%|