(17 February 2017, Hong Kong) The Q4 RICS (Royal Institution of Chartered Surveyors) Hong Kong Commercial Property Monitor showed a slowdown in the decline in occupier and investor segments as hypothesised by built environment professionals. The sentiment surrounding retail remained downbeat with sustained weakness, while the office sector experienced a rebound in recent quarters.
RICS’ two major headline indicators – the Occupier Sentiment Index (OSI) and the Investor Sentiment Index (ISI) – extrapolated this quarter with a +5 for both indicators. These indicators are constructed by taking the unweighted average of survey respondents’ analyses for three series relating to each market.
Demand for office space remains at or near cyclical highs with a forecast for both capital values and rents revising sharply higher from Q3 to Q4. For the office occupier market, anecdotal reports state that mainland Chinese firms are paying above market values for prime office floor place. A 6.3% appreciation on capital values (vs 2.7% in Q3) and a 5.5% increase on prime office space rents (vs 3.2% in Q3) are expected in 2017.
“The confidence in prime office space is largely a result of high demand from mainland financial and investment companies that are opening and expanding their offices in Hong Kong”, said Mr Frank Wong MRICS, RICS Hong Kong External Affairs and Public Concerns Committee Member, he added, “Hong Kong offers these companies a more corporate-friendly environment with a close proximity to mainland China.”
“Various multinational and foreign financial companies are relocating their offices from Hong Kong Island to Kowloon East. As firms are displaced from prime locations, secondary office space receives a boost in capital value and rent forecast,” Mr Wong said.
At a headline level, foreign enquiries remained flat in Q4 and were largely unchanged from Q3.
Most contributors (47%)continued to see no change in credit conditions. This metric has been relatively unchanged for the past nine quarters. Interestingly, the US dollar’s appreciation has also increased the premium of Hong Kong dollar assets to foreigners.
RICS Hong Kong Commercial Property Monitor is a quarterly sentiment index tracking trends in the commercial property market. It is a leading indicator for global investment and occupier markets. The full report is available at www.rics.org/economics.
