• Officeabsorption in Q2 supported by MNC cost-saving relocations and a significantamount of pre-leases in new completions
• Decreasingretail sales dented the rental growth in core retail areas, despite a generalincrease in tourist arrivals in the first five months of 2019
• Outlook ofboth office and retail leasing markets in H2 clouded by economic andgeopolitical headwinds.

HONG KONG, CHINA - MediaOutReach - 11 July 2019 - Global uncertainties and a drop in Wanchai/CausewayBay and Prime Central rentals due to weak demand contributed to theterritory-wide average office rent retreating for the first time in five years.Nonetheless, overall absorption rebounded from the negative territory in Q1 to498,134 sq ft in Q2, supported by MNC cost-saving relocations from core areas anda significant pre-leasing in new completions, although net absorption inGreater Central and Wanchai/Causeway Bay were down. Meanwhile, record-highgrowth in visitor arrivals did not lead to corresponding growth in retailsales. Most of the core retail rents recorded smaller quarterly growth thanthat in Q1, and Central rents continued to drop, as noted by Cushman &Wakefield, a leading global real estate services firm.

The rebound in net absorption in the overall Grade Aoffice market was largely due to the conversion of strong pre-leasing over thepast couple of years in new completions (a total of 410,700 sq ft) in Hong KongEast and Kowloon East; whereas weakened occupier demand, plus some cases of MNCdecentralization and downsizing, have led to a negative absorption in GreaterCentral (-182,352 sq ft) and in Wanchai/Causeway Bay (-90,795 sq ft). Mr John Siu, Cushman & Wakefield'sManaging Director, Hong Kong, commented, "Weakened demand from PRCfirms in core areas, plus MNCs becoming more cost-conscious as trade tensionsremain unresolved, have led to a steady decline in overall absorption over thepast year, from 1.05 million sq ft in H1 2018, to 868,100 sq ft in H2 2018, andto 479,325 sq ft in H1 2019."

Prime Central andWanchai/Causeway Bay rentals began to soften in Q1, and the drop in Q2 hasdeepened to 1.2% and 2.0% q-o-q, respectively. Rents in Greater Central andKowloon East also saw a mild dip of 0.7% and 0.4% q-o-q, respectively. Growthin the other submarkets was led by Hong Kong East (up 1.4% q-o-q), but theterritory-wide average rent still edged down for the first time in five yearsby 0.4% q-o-q. Mr Siu continued,"Comparing the rental trend with the change in availability, Hong KongEast has the tightest availability (3.9% when excluding the recent newcompletion) and quality office space that is support rental growth there. InGreater Central and Wanchai/Causeway Bay, although availability went up by at leastone percentage point from their respective Q1 figures, it is still consideredto be at a sustainable level (below 10%). The fact that 2020 will see no newsupply in any submarket will lend support to Central's rentals, however theoutlook for H2 2019 is clouded by economic and geopolitical uncertainties, asoccupiers await a clearer picture before expansion plans can be resumed."

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On a year-on-year basis, total tourist arrivals in the first fivemonths grew by 14.9% -- the most significant growth in nine years -- with a 20.7%rebound in same-day Mainland visitor arrivals over the same period. Mainlandtourist volume in May alone was up 10.4% from April. However, retail sales fellfor four consecutive months, led by a drop in jewelry & watches (-4.4%y-o-y). Reduced spending has dented the rental growth in core districts, whereTsimshatsui and Mongkok recorded a smaller quarterly rental growth than in thatin Q1 at 0.7% q-o-q and 1.0% q-o-q respectively. Causeway Bay rents were up0.7% q-o-q, and Central experienced a further drop of 3.0% q-o-q, almost doublethat of Q1. In terms of vacancy, Central edged up to 8.6% from 7.1% in Q1 whilethe other core districts stayed the same.

F&B spending continued to increase 4.8%-11.2% y-o-y except forChinese restaurants, but F&B rents still fell 0.8%-3% q-o-q on the Islandside while Tsimshatsui and Mongkok saw continued improvement of 0.4%-0.9%q-o-q. Increased tourists, particularly same-day visitors who are less inclinedto cross the harbor to the Island side, supported the F&B rental growth of0.4%-0.9% q-o-q in the Kowloon districts.

Mr Kevin Lam,Cushman & Wakefield's Executive Director, Head of Retail Services, HongKong, said, "Cautious consumersentiment amid global and local uncertainties affected the performance of theHong Kong retail market in Q2, and the outlook is expected to remain subdued inH2, except for trades like cosmetics, personal care and athleisure which shouldhold up better than the rest."

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 estateservices firms with 51,000 employees in approximately 400 offices and 70countries. Across Greater China, there are 21 offices servicing the localmarket. The company won four of the top awards in the Euromoney Survey 2017& 2018 in the categories of Overall, Agency Letting/Sales, Valuation andResearch in China. In 2018, the firm had revenue of $8.2 billion across coreservices of property, facilities and project management, leasing, capitalmarkets, advisory and other services. To learn more, visit www.cushmanwakefield.com.hk or follow us onLinkedIn (https://www.linkedin.com/company/cushman-&-wakefield-greater-china)