• Social unrest continued to dampen office leasing demand

    26 September 2019

    (25 September 2019, Hong Kong) Knight Frank launches the latest Hong Kong Monthly Report. In the office market in August, the ongoing social unrest has led to weak sentiments amongst tenants which affected their outlook and business plans. In the residential market, sales hovered at low levels amid market headwinds, with the monthly sales volume reached the lowest in 2019. Meanwhile, the impact of social unrest continued to be felt across Hong Kong’s retail market, weakening business performance in the short term.


    Grade-A Office                                                                                                         

    Hong Kong Island 

    Sentiments remained weak in August amidst the ongoing social unrest as tenants were very conservative with their outlook and business plans. Meanwhile, there were also more lease dispositions seen in the market just as some landlords became increasingly flexible in lease negotiations with attractive rental incentives.



    Leasing demand for Grade-A offices in Kowloon fell in August. Most of the deals recorded in Kowloon East were less than 3,000 sq ft, with demand mainly from the sourcing and electronics sectors. Given the impact of external and local uncertainties, leasing market momentum in Kowloon is expected to

    swing downwards for the rest of the year.



    Housing market activity continued to slow down in August amid the ongoing social unrest and Sino-US trade tension. Monthly residential sales volume reached the lowest in 2019, dropping 17.6% MoM to 4,084 units, according to Land Registry figures. The prolonged protests have soured investors’ appetite for homes in the secondary market, so secondary market sales fell 15% YoY. The luxury residential market was relatively resilient amid the escalating unrest.

    Several new projects will be launched in the coming month, reflecting continued confidence by developers in primary sales. However, we expect the home price correction to continue in the coming months, particularly in the secondary market, amid the combination of global uncertainty and local social tensions.



    The impact of social unrest continued to be felt across Hong Kong retail market. The Sino-US trade war, coupled with the weak renminbi, has also resulted in deteriorating market prospects and weaker consumption confidence.

    Retail sales fell 11.4% YoY to HK$34.4 billion in July, the first full month that was affected by the protests. Luxury goods recorded the largest decrease in sales of all sectors, tumbling 24.4% YoY.

    As there appears to be no end in sight to the social unrest, and there are no positive factors supporting the retail market, especially the luxury goods segment, the fall in luxury retail sales is likely to continue in the coming months. Given the slump in consumer sentiment, retail business performance will remain weak in the short term. We expect retail rents in prime streets to fall at least 15% for 2019.


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