(26 January 2018, Hong Kong) Knight Frank today releases the third quarter (Q4) 2017 Greater China Property Market Report which looks at the Grade-A office, luxury residential and prime retail property markets in Beijing, Shanghai, Guangzhou, Hong Kong and Taipei.
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Grade-A office rents in Shanghai are expected to rebound in 2018, while rents in Guangzhou will face downward pressure, given the huge amount of supply in the pipeline. Cooling measures in the residential market continued in major cities in the Greater China region, which is expected to suppress home price growth. In the retail market, many shopping malls will open on the Mainland. Shanghai will likely see a mild increase in rents, while Guangzhou will face downward pressure.
Grade-A Office
In Q4, Shanghai’s Grade-A office rents remained stable, while the vacancy rate edged downward due to increasing demand from co-working companies for Grade-A space. Co-working space service providers also continued to expand in Hong Kong, actively leasing Grade-A offices in core business areas.
Rents in Shanghai are expected to rebound in the first quarter (Q1) of 2018. Meanwhile, stock in Pazhou and International Finance City in Guangzhou will increase rapidly from 2018, which will push up the vacancy rate and impose downward pressure on rents.
In Hong Kong, rents in Central are expected to rise 2-5% in 2018, while pressure on rents in Kowloon East will gradually diminish along with absorption. In Taipei, the vacancy rate is expected to increase along with the launch of new office towers, but rents should remain stable.
Luxury Residential
Shanghai’s luxury residential market saw higher prices and stabilisation in sales volume in Q4. In Guangzhou, luxury home sales rebounded, but price growth narrowed to just 0.2% due to cooling measures.
In Hong Kong, the primary luxury residential market was red-hot, with developers actively launching new projects before the year end. In Taipei, the government restated the continuation of mortgage restrictions for luxury units and transaction volume remained stable in Q4.
There has been no sign of policy relaxation on the Mainland. Luxury home prices in Shanghai and Guangzhou are expected to remain stable or just slightly increase in 2018. In Hong Kong, the uptrend in luxury home prices is expected to continue, rising 8% over 2018. In Taipei, a number of super luxury projects will be launched in 2018, which will intensify competition.
Prime Retail
In Shanghai, nine new shopping malls opened in Q4, providing nearly 850,000 sqm of retail space in total. With two large shopping centres launched in Guangzhou, the vacancy rate remained stable and rents rose modestly in Q4.
Hong Kong’s retail sales and visitor arrival figures remained positive. In Taipei, most of the stores presently vacant were surrendered by apparel tenants, but demand for retail space was strong from Japanese grocery stores, banks and accessories shops.
Shanghai is expected to see a further increase of 3-5% in the average rent of retail properties in 2018. New retail supply in Guangzhou will remain at a high level, likely resulting in downward pressure on retail rents. In Hong Kong, the drop in prime street shop rents is set to narrow to 5-10% in 2018 after declining 10% in 2017. In Taipei, two major malls will open in the Xinyi Special District in 2018 and 2019, which is likely to draw footfall eastward.
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