HONG KONG, Oct. 8, 2012 /PRNewswire/ -- Cushman & Wakefield published Monthly Market Update for the first time, commenting on large-amount transactions and trends in commercial, retail and residential markets, and making forecasts.
Wanchai and Causeway Bay office markets remain active
Gary Fok, Senior Director of Commercial, Hong Kong, said, Wanchai and Causeway Bay's office markets remain active, with vacancy rate continuing to fall. In order to increase risk-taking abilities, some landlords who eye for higher-value occupants continue to attract large organisations to move into their premises. As a result, tenants without option rights were forced to relocate their offices. However, currently growth of rents remains static. In addition, the market takes note of a lease transaction of Cheung Kong Center in Central, involving lower levels with a total floor area of 8,000 sq ft by a mainland Chinese auctioneering company. Also, Convoy Financial Services has committed to take over a number of levels at 169 Electric Road, and acquired the naming rights of the building as a part of the lease. In Kowloon, eyes are on East Kowloon, where many tenants who moved into the present locations two or three years ago are now facing increasing rents. Monthly rents are up by nearly 50%. Those who cannot afford increasing rents are likely to relocate to Kwai Chung and Tsuen Wan. As Hong Kong still sees insufficient office supply, Cushman & Wakefield expects rents of commercial buildings in the city will continue to rise.
Investors of retail space adopt "wait-and-see" approach
Michele Woo, Senior Director of Retail Transaction Services, Hong Kong, said, retailers felt the impact of the slowing growth of retail sales contributed by the Individual Visit Scheme. And with the introduction of QE3 by the US Federal Reserve, asset prices are likely to climb and rents be driven up, undermining lease transactions of retail stores. Currently jewellery and watch sellers have a better acceptance level of higher rents. International fashion brands are still keen to invest in Asian markets, with a hope to set up shopping outlets in Hong Kong. Nevertheless the troubled European economies and ever-increasing rents at Hong Kong's prime shopping locations have caused international retailers to reduce their scale of operation in Hong Kong, for example, from opening 5 shopping outlets to 1 or 2. In addition, Cushman & Wakefield expects non-prime shopping locations at prime districts to see higher rents, including Central's Wellington Street and Lyndhurst Terrace, Causeway Bay's Sharp Street East and Yiu Wa Street and Tsim Sha Tsui's Cameron and Hankow Roads. An international fashion brand has also decided to open a new store at Portland Street in Mongkok. It is believed a large-amount lease transaction will take place soon.
Investment market remains active
Kent Fong, Co-head of Investment, Hong Kong, said, large-amount transaction market remains active. Low interest yield and QE3 prompted investors to purchase assets to hedge against inflation. In the first 9 months of this year, the sum of large amount transactions has already exceeded that of 2011, amounting to HK$8 billion. Setting high asking prices, landlords of office spaces, retail spaces and luxury residential properties hardly agree to bargain. Most of these landlords are expected to keep the assets in long term.
QE3 pushes up home prices and growth of rents
Vincent Cheung Kiu-cho, National Director of Valuation and Advisory Services,said, QE3 was launched as expected, and it will likely cause asset prices to inflate. During the 25 months from 2008 (when QE1 was launched) to Q1 2010, the property price index has surged 56.1%, with an average monthly growth rate of 2.2%. Afterwards, QE2 was launched in Q4 2010. During the 11-month period from the start of QE2 to Q2 2011, the index jumped by 13.4%, with an average monthly growth rate of 1.2%. Followed by QE2 was Operation Twist, where the US Federal Reserve sold short-term bonds and bought long-term bonds, launched in Q4 2011. Over the 11 months till QE3, the property price index has climbed up by 0.94%, meaning that the new wave of QE has caused Hong Kong's home prices to go up by 1% each month in average. Despite the smaller impact by QE3 on property prices, Cushman & Wakefield has to adjust the estimations on home prices and growth rate of rents. Overall speaking, property prices are 10% more expensive year-on-year in 2012. As homes are now more expensive, negotiation between landlords and tenants takes a longer time, and would-be home buyers turn to rental market. Rents are estimated to grow by 7% year-on-year in 2012.
About Cushman & Wakefield
Cushman & Wakefield is the world's largest privately-held commercial real estate services firm. The company advises and represents clients on all aspects of property occupancy and investment, and has established a preeminent position in the world's major markets, as evidenced by its frequent involvement in many of the most significant property leases, sales and assignments. Founded in 1917, it has 235 offices in 60 countries and more than 14,000 employees. It offers a complete range of services for all property types, fully-integrated on a global basis, including leasing, sales and acquisitions, debt and equity financing, investment banking, corporate services, property management, facilities management, project management, consulting and appraisal. The firm has more than US$5.5 billion in assets under management through its wholly-owned subsidiary Cushman & Wakefield Investors. A recognized leader in local and global real estate research, the firm publishes its market information and studies online at www.cushmanwakefield.com/knowledge. In China, Cushman & Wakefield maintains six market-leading offices in Beijing, Shanghai, Chengdu, Guangzhou, Shenzhen and Hong Kong. More information is available at www.cushmanwakefield.com.
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