(27 February 2020, Hong Kong) The COVID-19 outbreak, residual impact from sociopolitical unrest and external economic and geopolitical headwinds point to a challenging 2020 for Hong Kong. Despite all this, the commercial real estate market remains relatively resilient as Hong Kong’s economy is expected to stabilise gradually in H2 2020 and walk out of the shadows, according to CBRE’s annual flagship report – Greater China Real Estate Market Outlook 2020.
“With the global, China and local economies all facing strong headwinds, corporates and businesses may elect to stay cautious in 2020. However, should the COVID-19 outbreak be contained by the end of Q1-2, business momentum will likely pick up in H2 2020,” commented Tom Gaffney, Regional Managing Director, The Greater Bay Area & Hong Kong, CBRE.
Zooming into the office market, cost control remains a key theme, with pressure on rents to be the main agenda. However, Hong Kong East in particular Taikoo Shing is expected to benefit from low vacancy and the ‘decentralization’ trend. Some larger occupiers may consolidate their footprint amid the current downturn. While coworking space operators will focus on improving occupancy, virtual banks and TMT firms may emerge as new leasing demand along with introduction of 5G.
Hong Kong’s retail market endured a tough 2019 and shoring up occupancy will remain a priority for retail landlords given challenging market conditions in 2020. While rental decline is not expected to come to an end soon, CBRE believes lower rents could offer a window of opportunity and potentially attract more overseas retailers to Hong Kong, which retains its status as an important and lucrative international retail market.
Industrial market continues to be the most resilient commercial real estate sector, with warehouse rents supported by low vacancy, limited new supply and demand from relocating occupiers.
Transaction volume will fall noticeably in H1 2020 in Hong Kong’s investment market and will pick up gradually when the COVID-19 outbreak fades. Should there be an improvement in economic momentum after mid-year, investment demand may see a strong rebound in H2 2020, with solid interest remained for industrial properties in value-added deals.
“In Hong Kong, financial markets remain resilient despite a complex economic outlook. Interest rates are expected to stay low for longer. Combined with ample liquidity and the low-base effect, overall investment demand is forecast to increase relatively from 2019,” said Marcos Chan, Head of Research, The Greater Bay Area & Hong Kong, CBRE.
These findings are part of CBRE’s Greater China Real Estate Market Outlook 2020 report, which highlights major themes for real estate investment, office leasing, retail and logistics in the region.
For more details in 10 key trends for Greater China region, please visit www.cbre.com.
