Revival yet to come for Hong Kong’s real estate market

Only the retail market has demonstrated resilience, with high-street shop rents rising by 2.1% QoQ.

Hong Kong has a long way to go before its real estate market experiences a revival. 

According to Colliers, there’s a mixed sentiment across the city’s core real estate sectors, with retail being the only one to demonstrate resilience. 

In 3Q23, rents of high street shops by 2.1% QoQ to $223 psf.
“High street rents are forecasted to grow by 8% YOY in 2023, though retailers remain cautious on short-term expansion plans. We foresee a more distinguished market recovery from H2 2024 and beyond, with a focus on retail experiences and a greater diversity of brands,” said Cynthia Ng, head of Retail Services at Colliers in Hong Kong.

Office, on the other hand, observed a drop in rents, particularly in the Grade A office market which recorded a 2.3% QoQ decline in 3Q23 amidst a high vacancy of 14.9%.

“We foresee an overall drop of 4% to 5% in Grade A office rent in 2023 as the vacancy rate is expected to remain high despite some minor fluctuations throughout the year. In line with our findings from the Occupier Survey 2023, there is a mixed approach to space requirements. We see large-scale banks adopting a more cost-conscious space optimisation strategy, whereas there is a notable increase in demand from the Technology, media and telecom (TMT) and insurance sectors.” said Fiona Ngan, head of Office Services at Colliers Hong Kong.

Industrial rents likewise declined in 3Q23, falling 0.4% QoQ to $14.6 psf.

“We have seen industrial tenants remain very cautious in their market outlook and we expect this to translate into a weaker leasing demand in the coming quarters. Lease renewals and relocations from existing portfolios are both contributing to the upward trend and the growing vacancy rate of 3.2% in Q3. Our full-year general industrial rental forecast remains at 2% growth, whilst warehouse rents will experience a slight decline of 3% to 4% in 2023,” said Bill Chan, head of Industrial Services at Colliers in Hong Kong.

Colliers, however, remains positive that the real estate market will see a stronger revival by 2H24 and beyond retail, office, and industrial sectors.