News release

Hong Kong's property market on the cusp of full recovery in 2022

Retail properties poised to record strongest rental and capital value growth

December 09, 2021

Yvonne Liu

Public Relations Director, Hong Kong and Macao
+852 2846 5264

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
Office Market 

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
Central ▼2.0% ▲5-10%
Wanchai/Causeway Bay ▼9.5% ▼0-5%
Hong Kong East ▼7.4% ▼0-5%
Tsimshatsui ▼7.8% ▲0-5%
Kowloon East ▼7.1% ▼0-5%
Overall ▼5.2% ▲0-5%


Retail Market

The substantially improved leasing sentiment this year has encouraged retailers to commit to longer lease terms and more brick-and-mortar shops at more affordable rentals. Rental correction across the board was bottoming out in the second half of the year, of which High Street shops rental dropped by 0.5%, while rents of Prime shopping centres rebounded slightly by 0.2%. 

Luxury brands had been the most aggressive tenants in Hong Kong's retail market over the last decade and supported Russell Street in Causeway Bay to be the world's most expensive retail street by rental value. However, with the ongoing structural change in retail dynamics, the market has been switching from luxury focus to mid-to-mass market retailing. Luxury fashion and accessories brands have been reducing their flagship stores and some beginning to explore opportunities in the pop-up store format. 

Jeannette Chan, Senior Director of Retail at JLL in Hong Kong, said: "The phenomenon of high concentration of luxury brands is not expected to return in the foreseeable future. F&B and bakery, grocery, mass market fashion, sports and lifestyle trades, pop art as well as experiential retail are foreseen to be the next major source of leasing demand."

"The vacancy rates of High Street shops and Prime shopping centres are expected to improve further in 2022. We believe the overall rental correction has reached the cyclical bottom, though some adjustments will likely continue in some areas of major shopping districts to accommodate the structural change of the market. We expect High Street shop rents to rise 5-10% next year, while rents of Prime shopping centres shall climb 0-5%," she added. 

Hong Kong Prime Retail Indicator – % Change

Sector 2021 Rental Values* 2022 Rental Forecast
High Street Shops ▼6.9% ▲5-10%
Prime Shopping Centres ▼2.1% ▲0-5%


Residential Market

The better-than-expected economic recovery has supported the capital values of mass residential to rise by 4.4% in 2021, while the capital values of luxury residential grew by 7.2%. Supported by local upgrading demand triggered by the work-from-home practices, luxury residential rents grew by 3.2% in the year.

Residential sale transactions surged about 28% to a monthly average of 6,374 deals in the first 10 months of 2021, compared to a monthly average of 4,990 deals in 2020. If the trend continues, the average monthly transaction volume will reach the highest since 2013. 

The Northern Metropolis development plan was unveiled in the Policy Address 2021. Joseph Tsang, Chairman at JLL in Hong Kong, said: "We estimate the area needs to develop an additional gross residential floor area of 400 million sq ft to accommodate the Government's grand vision of housing an additional 1.54 million people. The area will be the centre of attention for developers and investors to capture market opportunities and growth potentials, where more acquisitions, agricultural land conversion and lease modifications will be recorded." 

For 2022, Joseph expects that mortgage rates will remain low, despite the potential interest rate rise.
"New private housing supply will remain low in the medium term, with private residential units that have commenced construction dropping noticeably since 2020 after the Government changed the public to private housing supply ratio to 70:30 in 2018. It will support the capital values of mass residential to stay firm and grow 0-5% next year, while luxury residential prices and rents will also climb 0-5%," he added.

Hong Kong Residential Indicator – % Change

Sector 2021 Capital Values* 2022 Capital Value Forecast
Mass Residential ▲4.4% ▲0-5%
Luxury Residential ▲7.2% ▲0-5%


Investment Market 

Capital values of Grade A offices declined moderately by 1.1% in the second half of 2021 as the rental drop abated. Capital values of High Street shops rebounded 3.5% during the same period, while capital values of industrial properties grew further by 1.3%.

Total investment volumes increased by 52% y-o-y to HKD 96.8 billion this year. Investors reallocated capital towards income-resilient assets or properties with repurposing potential. This boosted the total investment volume of industrial properties by 217% y-o-y to HKD 33.6 billion, which accounted for 35% of the total investment volumes, the highest among all property sectors.

Sales of hotels also turned active, in particular the mid-to-low end hotels with easy access to MTR stations. Investment considerations for en bloc hotels surged by 198% y-o-y this year as investors eyed on the potential to convert hotels into rental housing which offers higher profit margin and occupancy rate.

Oscar Chan, Head of Capital Markets at JLL in Hong Kong, said: "We believe hotel assets will remain the focus of investors in 2022 as well as aged buildings for compulsory sale. The sales momentum of industrial properties is expected to moderate as the capital values have been lifted considerably by strong capital inflows this year. Capital values of industrial properties are expected to climb 0-5% in 2022. Capital values of High Street shops and Grade A offices are expected to grow 5-10% and 0-5% respectively next year alongside the rental recovery."

Hong Kong Investment Indicator – % Change

Sector 2021 Capital Values* 2022 Capital Value Forecast
Grade A Office ▼6.1% ▲0-5%
High Street Shops ▼0.1% ▲5-10%
Industrial ▲1.6% ▲0-5%


About JLL

JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. JLL shapes the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $16.6 billion in 2020, operations in over 80 countries and a global workforce of more than 95,000 as of September 30, 2021. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit