Growth expected for retail, industrial leasing in 2022: CBRE

But the potential spread of the highly transmissible Omicron variant poses uncertainty to the market.

The overall Hong Kong commercial real estate market, particularly in retail and industrial sectors, is expected to see stronger leasing in 2022 but uncertainties remain due to the threats of the potential spread of the Omicron variant, according to CBRE.

CBRE Hong Kong Executive Director Marcos Chan said the higher chance of partial resumption of cross-border travel with Mainland China would support both business and retail activity in the city. Corporate activity will increase but business spending “will remain largely prudent.”

“The positive business outlook will see leasing demand strengthen in the retail and industrial property sectors and result in moderate rental and capital value growth, but the office sector is bounded by the upcoming supply boom, with rents poised to only stabilise in 2022 after a sharp decline from 2019 to 2021,” he said.

Retail rents are expected to rise by about 5% if there are no major pandemic outbreaks that may result in tightening social distancing measures which could pull back leasing demand, according to Lawrence Wan, senior director for Advisory & Transaction Services - Retail.

Wan noted that food and beverages (F&B), particularly Japanese cuisine, remains the most active sector in the leasing market.

“Mass market brands and necessity item retailers have been relatively more positive. Improved market sentiment has seen some landlords holding a firmer stance in terms of rental asking. Therefore, vacancy might stay high as the expectation gap between landlords and tenants widens,” he said. 

CBRE noted that leasing market sentiment improved in the fourth quarter of 2021, with leading high-street shop vacancy to decline 2.3 percentage points quarter-on-quarter to 14.4%.

F&B, fashion and related brands, and cosmetics stores were the largest demand drivers for retail space last year, accounting for over 70% of leasing transactions in 2021, F&B had close to a 50% share.

Rents in high street shops and prime shopping malls are expected to rise by up to 5%. New supply in prime shopping malls was expected to reach 1 million square feet (sq. ft.) in 2022 from 184,200 sq. ft. in 2021.

For the industrial sector, Samuel Lai, senior director for Advisory & Transaction Services - Industrial & Logistics said there were more expansion requirements in 2021 compared to the previous year, driven mainly by third-party logistics (3PL) operators that accounted for over 50% of the leasing activity.

With a possible demand recovery from retail-related trades, leasing demand from 3PLs is expected to pick up. We also see a sustained and growing leasing demand from the tech and healthcare sectors,” Lai said. “With limited space availability supporting rental growth in 2022, the industrial property sector is set to be the best performing sector across all commercial real estate sectors again.”

The warehouse sector rents increased 3.9% in 2021 and are expected to rise by 5% to 10% this year. Flatted factories and industrial/office sector rents rose by 1.3% and 0.2%, respectively, last year, whilst no data were provided for 2022. New supply for the warehouse sector is seen at 1.4 million sq. ft. in 2022, compared to 90,000 sq. ft. in 2021.

For the office sector, leasing momentum is expected to improve if the cross-border travel wins Mainland China partially, said Ada Fung, executive director, head of Advisory & Transaction Services - Office Services.

“Hong Kong’s steady economic growth and improving leasing demand from Chinese firms will likely see a rental decline to gradually slow down compared to 2021 but vacancy overhang and new supply boom will prevent office rents from a strong recovery,” Fung said. “Grade A office rents are expected to remain largely stable throughout 2022.”

Overall rents in Hong Kong will remain flat, following a decline of 7.3% in 2021. Greater Central and Kowloon East were the only submarkets expected to see an up to 5% increase in rental change, whilst Wanchai, Causeway Bay, Hong Kong East, and Tsim Sha Tsui were seen to decline up to 5%.

Overall new supply of Grade A Office for 2022 was estimated at 3.97 million sq. ft. compared to the 140,700 sq. ft. of new supply last year.

Reeves Yan, executive director and head of Capital Markets, said they expect rental growth in the retail property market, which will lure investors to look for opportunities in the city.

Despite the upcoming supply boom, local investors may keep their eye on office floors while rents bottom out. Potential rate hikes in the US will have limited impact on investment demand as high liquidity will likely lessen the pressure in Hong Kong in 2022,” Yan said.

Overall investment volume in 2021 reached $79.6m, surpassing 2019 and 2020 levels but is only 43% of the peak in 2017.

Follow the link for more news on

Join Hong Kong Business community
Since you're here...

...there are many ways you can work with us to advertise your company and connect to your customers. Our team can help you dight and create an advertising campaign, in print and digital, on this website and in print magazine.

We can also organize a real life or digital event for you and find thought leader speakers as well as industry leaders, who could be your potential partners, to join the event. We also run some awards programmes which give you an opportunity to be recognized for your achievements during the year and you can join this as a participant or a sponsor.

Let us help you drive your business forward with a good partnership!


‘Wall-less’ office tears down barriers to collaboration amongst AnyMind’s creatives
The office opens up for employees to collaborate, relax, feed off one another’s energy, and enjoy ‘happy hour’ and ‘mental space.’
Auction houses thrive on Asian millennials’ art-buying power
Millennials are seen to be particularly drawn to contemporary art as growth for Christie’s, Sotheby’s, and Phillips are highly anticipated in art hubs Hong Kong and Singapore.
Hong Kong’s livi bank launches game-changing app for SMEs
Going fully digital on opening accounts and approving quick loans to SMEs raises ‘livi Business’ disbursements to over HK$70m (US$8.9m) as of end-April.