29 JUL 2021
RICS Global Commercial Property Market Survey, Q2 2021
The Hong Kong commercial property market continues to face challenging times, as 59% of respondents to the Q2 2021 RICS Global Commercial Property Survey suggest the market was in some stage of a downturn.
At the headline level, a net balance of -16% of respondents reported a fall in occupier demand, and while this is the ninth consecutive quarterly fall recorded, it is not as negative as the -52% (net balance) recorded in the previous quarter. Office and retail demand is still in decline, although these are less negative than previously. There is also now a flat picture in demand for industrial space - while other countries reported growth in industrial sector demand, in Hong Kong a net balance of -3% reported a fall in demand, up from -25% in the previous quarter.
Falling demand saw the availability of leasable space increase according to respondents, with +27% noting more commercial property on the market. This was seen across all sectors, but as it mirrors demand there is less available industrial space, than office and retail.
Looking at rents, and due to falling demand and the increasing availability of units, it is unsurprising that commercial rents are expected to fall by 1.7%. Rents are expected to be particularly negative for prime and secondary retail sites (down -3.5% and -3.3% respectively).
Investor appetite for the commercial sector in Hong Kong continued to dip as -4% of contributors reported a fall in all-property investment enquiries over the quarter. However, falling levels of new investment enquires for office (net balance -11%) and retail (net balance -5%) spaces masked a small growth in investor interest for industrial units (net balance +5%).
Similarly, the Q2 capital value expectations for the next year look particularly challenging with a net balance of -1% of respondents expecting property to fall in value. Prime and secondary offices and retail spaces, look particularly challenging and –mask an expectation that prime industrial space may perform slightly better (+1.1%).
Tarrant Parsons, RICS Economist, said:
“The latest survey feedback is consistent with a steadily recovering picture across the global commercial real estate market. Although industrials/logistics, supported by rapid growth in e-commerce, remains the only mainstream sector seeing an outright uplift in demand at the aggregate level, the negativity surrounding offices and retail has diminished to a significant degree in Q2.
“As a result, all global regions continue to see headline sentiment indices move further away from the lows hit during the middle of last year.
“While in Hong Kong, and the Asia-Pacific region more widely, there remains a somewhat more noticeable excess of supply over demand.
“Nevertheless, there are some alternative asset classes which display a firmly positive outlook right across the globe, with data centres, multifamily residential and aged care facilities in particular displaying solid capital value expectations for the year ahead.”
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