- Overalloffice rental dropped for a consecutive sixth quarter
- Office availabilityclimbed to 11.6%, the highest level since 2005
- Retail sales remained weak withCauseway Bay retail vacancy rate hitting a record high
- F&B sector demand is stillunder the recent impacts from COVID-19; athleisure sector will grow exponentiallyinto a post-pandemic new trend
HONG KONG, CHINA - MediaOutReach - 6 October2020 - Office rentals extended their declines in Q3, for a sixth consecutivequarter, with the average rent in Hong Kong overall falling 4.7% q-o-q and13.9% YTD. The drop was largely driven by rental decline in Greater Central(down 6.3% q-o-q and 16.9% YTD) and Wanchai/Causeway Bay (contracted 5.2% q-o-qand 15.0% YTD). As the leasing market is expected to remain weak throughyear-end, office rentals in Greater Central and Wanchai/Causeway Bay are forecastto drop by as much as 25% and 23%, respectively, for the full year of 2020.
As occupiers continueweather a challenging business environment, net absorption fell by the most everon record, by -633,000 sq ft (net floor area), in the fourth consecutivequarter of negative absorption. Combined,negative absorption over the first three quarters of 2020 totalled 1.7 millionsq ft. Total office space surrendered reached 626,000 sq ft in Q3, representinganother 8% increase from Q2 2020. As a result, the overallavailability rate climbed to 11.6%, with highest availability recorded inKowloon West and Kowloon East, of 16.6% and 14.9% respectively.
Mr. Keith Hemshall, Cushman & Wakefield'sExecutive Director & Head of Office Services, Hong Kong, commented, "Of the total, 70%space was surrendered by multinational corporations.This upward trend is expected to continue for the remainder of 2020. However,there are also cases of tenants capitalising on this opportunity to upgradetheir office environment or to relocate within the same district at a morecompetitive rate".
Mr. John Siu, Cushman & Wakefield's ManagingDirector, Hong Kong, commented, "One of the keyfindings from our 2020 Office Occupier Survey, 65% of respondents are planningto allow working from home on a long-term basis. While that's certain to alterthe office leasing landscape, we do not necessarily see it having a major impacton office demand in the long run. It is likely that much of the work from homewill be part-time, perhaps one to two days a week. In addition, as firms lookto allow more social distancing within the office, many may look to workingfrom home to offset the need to add to their office footprint."
The retail market continued to be hard-hitby the pandemic and a third wave of COVID-19 cases in Hong Kong. As the latestwave prompted the tightening of social distancing measures, retail salesremained weak, totaling HKD 52.02 billion in the first two months of the thirdquarter combined, a decline of 18.5% year-on-year. With Mainland visitors amajor pillar of retail spending, the on-going border closures continued toseverely impact retail sales. Jewellery and watch sales dropped by 47.4%year-on-year while medicines and cosmetics sales fell by 47.3% over the sameperiod.
Retail rentals continued to decline,though at a lower pace as compared to past quarters. The sharpest declines inretail rentals were recorded in the areas of Causeway Bay and Central, recordingdeclines by 7.9% and 7.8% quarter-on-quarter, respectively, and by 41.3% and40.8% respectively, year-to-date.
Vacancy rates across all major shoppingdistricts were in the double-digits, with those in Causeway Bay climbingsharply to 13.2%, from 7.9% the previous quarter. Meanwhile, rental declinesfor F&B spaces in Q3 showed signs of slowing, but remain down by around 30%year-to-date across all districts.
Mr Kevin Lam, Cushman & Wakefield's Executive Director, Headof Retail Services, Hong Kong,commented, "Among the major new leases that took place during Q3, we saw amajor contribution from athleisure brands, representing a possible new trendpost-pandemic that may dominate the market and drive the market recovery in thenear future. With the community becoming more health-conscious while at thesame time spending more time at home, we see great opportunities for athleisurebrands to gain ground in this fast-adapting market."
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About Cushman & Wakefield
Cushman& Wakefield (NYSE: CWK) is a leading global real estate services firm thatdelivers exceptional value for real estate occupiers and owners. Cushman &Wakefield is among the largest real estate services firms with approximately53,000 employees in 400 offices and 60 countries. Across Greater China, 22 officesare servicing the local market. The company won four of the top awards in theEuromoney Survey 2017, 2018 and 2020 in the categories of Overall, Agency Letting/Sales,Valuation and Research in China. In 2019, the firm had revenue of $ 8.8 billionacross core services of property, facilities and project management, leasing,capital markets, valuation and other services. To learn more, visit www.cushmanwakefield.com.hk or follow us on LinkedIn (