CBRE released its Hong Kong 2022 Market Outlook on 5th January. According to the commercial real estate and investment firm, Hong Kong commercial real estate market is expected to see stronger leasing momentum in 2022 and capital values are set to strengthen as rents bottom out.
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“2022 will still be a year full of uncertainties. While a full resumption of international travel is highly unlikely, there is a higher chance for the partial resumption of cross-border travel with Mainland China, which would give a boost to both business and retail activity in Hong Kong. Levels of corporate activity are set to climb further 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 stabilize in 2022 after a sharp decline from 2019 to 2021,” said Marcos Chan, Executive Director and Head of Research, CBRE Hong Kong.
CBRE noted that the leasing market sentiment improved from the previous quarter, leading high-street shop vacancy to fall by 2.3 percent points in Q4 2021 to 14.4 percent. Tsim Sha Tsui saw the sharpest decline, down 4.3 percent points quarter-on-quarter to 15.9 percent. Overall vacancy fell 1.3 percent points over full-year 2021, with Mong Kok the only submarket in which vacancy rose during the year, up 1.7 percent points.
F&B, fashion and related brands as well as cosmetics stores were the largest demand drivers for retail space in 2021, accounting for over 70 percent of the leasing transactions in 2021. F&B on its own had close to a 50 percent-share.
Owing to relatively high vacancy, improved leasing momentum did not translate into substantial rental growth in Q4 2021. High-street shop rents held flat during the quarter, ensuring full-year growth stood at 1.2 percent.
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“Over 2021, 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. We expect retail rents to edge up about 5 percent in 2022 assuming no major local pandemic outbreak and hence no tightening in social distancing measures which could lead to a pullback in leasing demand,” said Lawrence Wan, Senior Director, Advisory & Transaction Services – Retail, CBRE Hong Kong.