COMMERCIAL PROPERTY | Staff Reporter, Hong Kong

Office market end users hold back investments due to COVID-19 outbreak

General market declined by 4.1% whilst commercial volumes fell.

Most end users are holding back from making any purchase decisions in the office market as business prospects have turned worse due to the COVID-19 pandemic, according to Savills. This has left bargain-hunting investors looking at 30% or more in discounts for certain assets.

The general market registered a decline of 4.1% as Central grade A office prices were hit the most, crashing by 11.5% in Q1 2020, whilst commercial volumes fell by 36% YoY in January.

Prime street shop prices also fell by 6.5% in Q1 2020, with Tsim Sha Tsui and Mong Kok registering greater declines. Stricter controls on borders and limits on social activities have also led to reduction in retail sales and visitor arrivals, causing a decline of 96% in February.

Gap between prospective buyers and sellers has widened and deals are being done closer to offer prices.

Meanwhile, retail landlords are not yet acquiescing to the 30% to 40% discounts. However, they are finding it hard to sustain occupancy even with deeply discounted rents and generous rental concessions.

Strata office landlords are also mulling to cut rents to fill vacancies rather than selling assets at deep discounts.

Retail investors are also on standby as the retail market may be about to undergo another structural shift after years of success supported by Mainland spending.

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