• Office absorptionin Q1 grew to 77,101 sq ft from negative territory in last quarter
• Amid theweak demand from PRC firms and co-working operators, rents in Greater Central wereflat but were largely stable in other submarkets, supported by continueddecentralization
• Retaillocations on the Kowloon side are benefiting from the new transportation linksand are forecast to see relatively strong rental growth this year.

HONGKONG, CHINA - Media OutReach - 10 April 2019 - Office absorption rose to 77,101 sq ft in Q1 fromnegative territory, supported by the realization of pre-commitments in tworecent completions totalling 127,483 sq ft along with some easing in trade tensions betweenChina and the U.S. Demand was heavily driven by relocation and consolidationrequirements, with the insurance sector particularly active. However, rents inGreater Central which were flat in the quarter showed signs of beginning topeak, on the back of weak demand from PRC firms. In the retail leasingmarket, core retail areas in Kowloon are benefiting from new transportationinfrastructure, which is funnelling visitor traffic into West Kowloon and Tsimshatsui, as noted by Cushman & Wakefield, a global leaderin commercial real estate services.

The territory-wide net Grade A officeabsorption rose from a negative -11,744 sq ft in Q4 2018 to 77,101 sq ft in Q1,with more than 97,000 sq ft of the demand concentrating in Kowloon East and Greater Tsimshatsui, although part of it was offset by negative absorption inWanchai/Causeway Bay due to regular return of space. Mr Keith Hemshall, Cushman & Wakefield's Executive Director, Headof Office Services, Hong Kong, commented, "Kowloon East continued toattract relocation and consolidation requirements, and the insurance sector wasa key driver of the demand. Meanwhile, a few financial services firms picked uppockets of space in Central, keeping absorption in positive territory despite aslowdown in growth by PRC and co-working firms in the sub-market."

Healthy demand levels withlimited availability in many submarkets led to minimal growth of0.2% overall rents in Q1, while Prime Central rents softened with a 0.4% drop q-o-q. Mr John Siu, Cushman & Wakefield's Managing Director, Hong Kong,said, "Greater Central rents were flat at HK$139.1 per sq ft per monthwhile Prime Central was under pressure as demand from PRC firms remained weak. Butwith Greater Central's availability rate edging lower to 5.1% (4.1% for prime Centralbuildings), the high rents are still sustainable due to the low availability.Looking forward to Q2, we expect financial companies, especially new players,will be more active in looking for space in Greater Central for a prestigiousaddress, while companies with consolidation needs will continue to head tonon-core areas such as Kowloon East which are able to meet large spacerequirements at lower rentals."

Supported by the new transportation links to mainland China, average daily Mainland visitor arrivals grew by 19% y-o-y during the first twomonths of 2019 -- the biggest y-o-y growth in five years -- with a 21% rebound y-o-yin same-day visitor volume. This funneled more business to the retail areas inKowloon in particular. Meanwhile, a growth in sales for cosmetics and medicinesagainst the general drop in retail sales in the first two months supported theexpansion of cosmetics shops in various locations. Due to the shifted spendingpattern to non-discretionary retail, plus the improved business brought byincreased visitors, Tsimshatsui and Mongkok recorded a bigger quarterly rentalgrowth of 1.1% and 2.6% respectively, compared with 0.6% growth in Causeway Bayand a 1.6% drop in Central.

Improved business drove Tsimshatsui's vacancy rate down to zero,the same level as in Causeway Bay. Mongkok's vacancy also tightened to 5.5%while Central remained at 7.1% -- the location with the highest vacancy. Withrespect to F&B rents, the pressure was on Causeway Bay as business growththere lagged behind Tsimshatsui and Mongkok, while operators continued to bechallenged by a tight labor market. These factors have caused F&B rents inCauseway Bay to trend down by 3.8% q-o-q, the most significant decline amongall core locations.

Mr Kevin Lam,Cushman & Wakefield's Executive Director, Head of Retail Services, HongKong, said, "Despite a fall in retailsales in the first twomonths of the quarter, growing tourist volumes and arebound in the Renminbi are expected to support the retail market in Hong Kongin general. The launch of the new transportation links to mainland China hasbrought clear benefits to sales in Tsimshatsui and Mongkok but less so on theIsland side. If these trends continue, we can expect comparatively higherrental growth in Tsimshatsui and Mongkok than in Causeway Bay this year."

About Cushman & Wakefield

Cushman & Wakefield (NYSE: CWK) is a leading globalreal estate services firm that delivers exceptional value for real estateoccupiers and owners. Cushman & Wakefield is among the largest real estate servicesfirms with 51,000 employees in approximately 400 offices and 70 countries.Across Greater China, there are 20 offices servicing the local market. Thecompany won four of the top awards in the Euromoney Survey 2017 & 2018 inthe categories of Overall, Agency Letting/Sales, Valuation and Research inChina. In 2018, the firm had revenue of $8.2 billion across core services ofproperty, facilities and project management, leasing, capital markets, advisoryand other services. To learn more, visit www.cushmanwakefield.com.hkor follow us on LinkedIn (https://www.linkedin.com/company/cushman-&-wakefield-greater-china)