Property recovery broadens to office, retail: report

The bank raised its 2026 home price and retail sales forecasts, whilst upgrading Henderson Land and Link REIT.

Property recovery is widening beyond residential, with office and retail also showing signs of improvement, according to Morgan Stanley.

The bank raised its 2026 home price growth forecast to 12%, from 10%, after prices climbed 7.7% year-to-date.

It also expects home prices to rise another 5% in 2027, supported by strong new project sales, higher selling prices in later launch phases, declining inventory, and lower land supply.

In the office market, Morgan Stanley raised its 2026 Central rental growth forecast to 5%, from 3%, as Central rents rose 3.8% year-to-date.

Vacancy in Central also improved to 9.6% as of March 2026, down 1.9 percentage points year-on-year, helped by demand for higher-quality offices.

Retail is also recovering, with Hong Kong retail sales up 11.8% YoY in the first two months of 2026. Morgan Stanley lifted its full-year retail sales growth forecast to 5%, from 3%, citing stronger tourism, mega events, a firmer renminbi, and demand for luxury and durable goods.

Following the improved outlook, Morgan Stanley upgraded Henderson Land to Overweight from Equal-weight and raised its price target to $37 from $33. It also upgraded Link REIT to Overweight from Equal-weight and raised its price target to $44 from $37.

The bank’s preferred Overweight-rated picks include CKA, SHKP, Henderson, Hongkong Land, Swire Properties, and Link REIT.

Morgan Stanley flagged restrictive housing policies, geopolitical tensions, and uncertainty over US interest rates as key risks to the outlook.