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Cushman & Wakefield Expects HK Office Rent to Fall 7-9%, T1 Street-level Store Rent to Rise Up to 5% in 2024
John Siu, Managing Director at Cushman & Wakefield Hong Kong, said that the overall net take-up of Grade A offices in 2Q24 was positive 318,000 sq ft, leading to a positive net...
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Cushman & Wakefield Expects HK Office Rent to Fall 7-9%, T1 Street-level Store Rent to Rise Up to 5% in 2024
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John Siu, Managing Director at Cushman & Wakefield Hong Kong, said that the overall net take-up of Grade A offices in 2Q24 was positive 318,000 sq ft, leading to a positive net take-up of about 580,000 sq ft in 1H24. In terms of new leasing activities, 964,500 square feet of new leasing space was recorded in 2Q24, an increase of about 70% YoY, with Kowloon East and Central accounting for the highest share, accounting for 33% and 22% respectively.

Looking ahead to 2H24, Siu expected the pace of office leasing to be similar to that of 1H24, with enterprises still focusing on cost control, and the market taking some time to absorb the space available for leasing in the face of sufficient supply. Therefore, office rents will continue to be under pressure during the year. The firm maintained its original forecast of an annual rental decline of 7-9%.

Kevin Lam, Executive Director, Head of Retail Services at Cushman & Wakefield Hong Kong, noted that with the change in consumption patterns of Chinese visitors and the trend of Hong Kong people going to Mainland to spend money, which in turn undermined local consumption, the total value of local retail sales from January to May this year dropped by 6.1% YoY. Nevertheless, the overall vacancy rate of first-tier street-level retail outlets remained largely stable, with Tsim Sha Tsui's higher visitor and pedestrian flows supporting a 1.2 ppt QoQ decrease in the vacancy rate to 10.6%, while vacancies at Causeway Bay (2.6%), Central (7.0%) and Mong Kok (11.1%) remained flat QoQ.

With the steady rise in visitor arrivals, first-tier street-level rents in various districts also recorded low single-digit QoQ growth, with Tsim Sha Tsui, the most popular district among tourists, registering the most notable increases of 2.8% QoQ and 3.9% YoY, followed by Central, which is supported by high-end tourists and local consumption, with a quarterly rental increase of 2.7%. As for food and beverage rentals, local operators were generally cautious, with Causeway Bay and Central up 3% QoQ, while Tsim Sha Tsui and Mong Kok recorded a slight increase of less than 1%.

Lam expected first-tier street-level rents in all districts to increase by 0-5% in 2H24. In terms of leasing activity, although some international brands took advantage of the rental reversal to open shops in core districts during the quarter, it is believed that they will still be cautious in their approach, and leasing demand in 2H will continue to be dominated by domestic retail and food and beverage brands.

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