Recovery in property market likely to remain uneven in H2

The Grade A office market is seen to record a net withdrawal in the second half.

The uneven recovery in Hong Kong’s property market will likely persist in the second half (H2) of the year, JLL said in a report.

In its Mid-year Property Market Review, JLL said the residential and industrial markets are showing signs of recovery, whilst rents and capital values in high street shops are projected to rebound.

Grade A office rents, meanwhile, are expected to correct mildly and investment activities are likely to stay subdued in H2 2021.

“We believe the gross leasing volume to improve in the second half of 2021,” Alex Barnes, head of Agency Leasing at JLL in Hong Kong, said.

“However, the market will continue to record net withdrawal during the period due to the considerable amount of marketable space to be made available in the next six months. It will drive the vacancy rate higher.”

The Grade A office market recorded a net withdrawal of 518,400 square feet in the first half (H1) of the year after a net withdrawal of 2.7 million in 2020.

It led to an increase in the overall vacancy rate of 9.5% at the end of June, the second-highest level since the end of April 2004.

The overall Grade A office rents dropped 4.7% in H1 2021. The fall in rents has moderated compared with the fall of 6.6% in H2 2020.

Moreover, the retail market, JLL said, is undergoing a major reset with tenant mix switching from a focus on luxury to mid-mass market retailing.

Leasing activity improved significantly in H1 2021 as asking rents softened. Rents of high street shops dropped 6.5% during the period, while rents for prime shopping centres fell 2.3%.

Likewise, the residential market gathered momentum and grew 3% in H1 2021 with the release of pent-up demand and virus containment measures in the city.

The number of residential sales also picked up gradually from a monthly average of 4,562 in H1 2020 to 6,689 in H1 2021. There are also increasing trends in both the number and consideration of high-end residential transactions worth over $20m.

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