Colliers International, Hong Kong

Office Sector to Follow Suit with Stabilising Rentals

Recent economic indicators are all pointing towards a recovery.  Taking the lead in the real estate market is the residential sector that has seen a dramatic rebound of 25% in prices since March and a rise in rentals in the third quarter of 2009.

Speaking at a press briefing today, Richard Kirke, Managing Director, Colliers International Hong Kong said that the Hong Kong's residential property market has seen signs of full recovery, at a much quicker pace than many parts of the region. "The pace of recovery for the four main sectors varies, but it is a positive picture. The sales market was the first to recover and the leasing market appears to be at or very near the bottom of the cycle. With growing confidence in a global economic recovery, we have witnessed many large occupiers of space start planning for increasing head counts in 2010 and beyond."

Residential
The luxury residential sector has shown the biggest and quickest rebound.  Buying interest remained keen in the third quarter of 2009.  The most favoured properties are mid-tier units that range from HK$20 – 50 million. Demand for top-tier units with the price range of HK$50 million or over was also strong and with only limited stock available in the traditional luxury residential areas such as the Peak and the South Side significant price increases were recorded.

"Sales transactions with lump sum prices of HK$100 million or above saw 80% quarter-on-quarter (QoQ) growth during 3Q2009.  Average luxury residential prices also increased 9.6% QoQ to HK$14,200 per sq ft as of August 2009," said Ricky Poon, Executive Director, Residential Sales, Colliers International.  "Prices are currently only 5% below the peak just before the financial crisis in September 2008.  Some individual units have actually surpassed their previous highs.  We anticipate that the market will set new peaks again in the next 12 months."

Office
According to the latest findings of human resources consultants, hiring expectations in the private sector turned more positive in 3Q2009.  Although the increase in new hires has yet to be fully reflected in the office leasing marketing in the form of a net increase in floor area requirements, there was an improvement in confidence across the board.

"Statistics showed that the pace of decline in rentals tapered off further, from 12.1% QoQ in 2Q2009 to 1.3% QoQ in 3Q2009. The average effective rentals for Grade A office in fact posted a marginal rise in the latter part of 3Q," said Simon Lo, Director, Research & Advisory, Colliers International.

Office rentals are forecast to rise 5% or above in the next 12 months.  However, the prospect for growth is mixed amongst various sub-markets.

"We expect Central and Admiralty will see higher demand for space than other areas," said Iain Chapman, Director, Commercial – Tenant Representation, Colliers International. "The vacancy rate in this sub-market remains very low at 5.6%.  Also, there are signs that individual hedge funds are returning to the market, which demands premium office space in the district."

Kowloon East is another sub-market that is expected to register a strong growth.  Firstly, the rents in this sub-market remain very low when compared with the rents on HK Island.  Secondly, the district is in favour with companies from the insurance, distribution and consumer products industries.

Industrial
In the industrial property sector, average rentals posted a mild decline of 0.5%QoQ during 3Q2009.  The bulk of industrialists continued to put a hold on their expansion, waiting for the external trade performance to improve. The sales market was relatively more active due to the prevailing low interest rate environment.

Retail
The retail sector was benefitted from a significant increase in the volume of sales transactions in the past quarter. Retail shops within the price bracket of HK$30 million to HK$50 million were the most popular.  Local retailers were confident about a revival in retail rentals over the near to medium term.  On the leasing front, the food and beverage sector was the key driver in 3Q2009.  Meanwhile, international retailers are expected to become active after the first quarter next year, serving as a support for upward adjustment of retail rentals.

About Colliers International

Colliers Macaulay Nicolls Inc. (CMN) operating as Colliers International is a leading global real estate services company that provides a full range of services to real estate users, owners and investors worldwide. Colliers operates in 294 offices in 61 countries.  In Asia Pacific, Colliers has 64 offices in 15 countries.  Services include brokerage, property management, hotel investment sales and consulting, corporate services, valuation, consulting and appraisal services, mortgage banking and research.  Colliers International is a worldwide affiliation of independently owned and operated companies.  Locally, Colliers professionals serve clients in Hong Kong.

Contact Information

May Chow        
Regional Manager
Communications and PR, Hong Kong Marketing
Colliers International (Hong Kong) Ltd
Tel    852 2822 0736
Fax   852 2868 5275
Email: May.Chow@colliers.com

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