Investment market continues to hit new highs in January

(25 February 2018, Hong Kong) The property investment market continued to hit new highs in January riding on strong investor interest, according to JLL’s latest Property Market Monitor.  A total of four en-bloc office buildings were sold for a total consideration of HKD 14.8 billion in January, 17% higher than a year ago.

The en-bloc sale of 18 King Wah Road—a new Grade A office development—drew the most attention, setting a new record for the largest office transaction in Hong Kong East.

In the leasing market, decentralisation remained as a key theme playing out among office tenants. Leasing activity was focused on Hong Kong East and Kowloon East, where tenant decentralisation and consolidation requirements underpinned demand. Net take-up in the overall market amounted to 209,900 sq ft in January. In Central, net absorption reached 33,000 sq ft as several tenants sought room for expansion.

Alex Barnes, Head of Markets at JLL, said: “The widening gap between rents in Central and emerging core business districts will add momentum to decentralisation. With the support of the outbound growth of mainland Chinese companies, we expect Hong Kong’s Grade A office market rentals to continue to trend higher, rising by up to 5% in 2018. Central will continue to outperform the overall market as demand competes for the pockets of space that exist.”

Office rents in Central advanced by 0.7% m-o-m in January on the back of a tightened vacancy environment. Rents in Hong Kong East grew by 0.8% m-o-m, driven largely by increasing demand at the top-end of the market.

Denis Ma, Head of Research at JLL, said: “The strong pricing achieved in the government sale of the Murray Road Car Park in May last year is now starting to permeate through the broader office market as investors reset benchmarks. Moreover, the record high prices being set in the market are no longer relying solely on PRC buyers with local money now also flowing into the market. Coupled with a tight occupier market, we expect capital values to rise a further 5-10% in 2018 even with interest rates set to rise further.” 

Grade A Office Vacancy Rates

Source: Research, JLL

In the city’s residential market, sentiment remained upbeat buttressed by record high land sale for government sites in Kowloon as well as strong gains in the local stock market. Capital values of mass residential properties inched up by a further 0.9% m-o-m in January following an increase of 1.3% m-o-m the previous month.

For further details, please visit http://www.jll.com.hk.