Hong Kong rents keep falling and falling

Cheaper rents have become one of the few upsides to the dour economic climate besetting Hong Kong.

Rents are expected to drop this year in Hong Kong, estimates Cushman & Wakefield, the world's largest privately owned real estate services firm.

In its forecast covering the commercial leasing, investment and residential markets, the company said Hong Kong landlords are not optimistic about the economy in 2012 and have lowered asking prices. In addition, they're offering more flexible lease terms and conditions in order to entice renewals and attract new tenants.

Executive Director John Siu said "Occupants of Greater Central office buildings have cut or even halted their expansion of office space amid unfavourable factors, such as the European sovereign debt crisis, global economic uncertainties and lacklustre performance of the local stock market."

Due to a lack of new projects with affordable rents to stimulate relocation it is expected the market will see fewer new lease cases and less leased floor space, which will amount to 50% to 60% of the total in 2011.

Prime retail space, however, is an exception to the trend of falling rents. Senior Director, Retail Transaction Services Michele Woo said that when compared to 2011, prime street locations and other slightly less prime locations will see rents rise by 25% to 35% and 15% to 20%, respectively.

"Landlords will soon begin to negotiate with tenants on leases expiring in the second half of 2012 and stand to benefit from the large increase in rents since 2009.”

Cushman & Wakefield's estimates:

• Average rents will fall by 5% to 10%, subject to location.
• A drop in leasing of Grade A office space expected. Rents to drop by 5% to 15%.
• Rents in Greater Central are expected to experience a decrease of 15%.
• Small to medium-sized flat prices to fall by up to 15% in 2012.
• Rents in key retail areas will see growth of 10% to 15% in 2012.
• Food & Beverage operators to remain active in the market and continue to fight for prime locations on main streets.
• International brands will continue to flock to Hong Kong, increasing competition for prime street locations.
• The global economy is unlikely to recover in the short term and the property market will face greater pressure in 2012.

Cushman & Wakefield is the world's largest privately-held commercial real estate services firm. Founded in 1917, it has 235 offices in 60 countries and more than 13,000 employees.
 

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Tags: Cushman & Wakefield, Hong Kong rents