Hong Kong office market pins its hope for growth on Shenzhen-HK Stock Connect

Office letting market could be buoyed by then.

In the luxury residential market, it has been noted that in the short term, curbing measures are expected to remain in the Mainland’s first-tier cities.

According to a research note from Knight Frank, however, luxury residential prices are set to rise further, propelled by high premiums in recent residential land transactions.

The Hong Kong market remained polarised, with super-luxury homes popular with billionaires, but other homes recording price drops because of an anticipated increase in supply and a potential interest-rate rise.

Here's more from Knight Frank:

Grade-A Office: Abundant upcoming supply is expected to push up office vacancy rates in Beijing, Shanghai, Guangzhou and Taipei. In Hong Kong, leasing activity was slow on Hong Kong Island due to the low availability of space and weaker demand from the Mainland, while Kowloon East remained active, boosted by strong relocation demand from tenants on Hong Kong Island. Shenzhen-Hong Kong Stock Connect, which will potentially be launched in the second half of the year, is set to shore up the office letting market in Hong Kong.

Retail: In Q2, the Mainland retail market remained challenging, but rents were stable for prime retail space. Brick-and-mortar shops in major cities will remain under pressure with the slower economy and the increasing popularity of online shopping. In Hong Kong, with Mainland visitor numbers declining, along with their spending, both rents and prices of prime shops decreased significantly. The Hong Kong retail market is expected to bottom out early next year, underpinned by a slower decline in Mainland visitor numbers and retailer adaptation to changes in consumption patterns.