Hong Kong Wen Wei Po (by Lai ChiTin)
Political conflicts continue to influence the business environment in Hong Kong, suppressing the rents of both shops and offices to decline. In a report released yesterday, DTZ pointed out that the growth of the number of visitors to Hong Kong continued to hit new high when reviewing the second quarter performance of the Hong Kong office and retail shops rental market, but consumption decreased even though the visitors number increased, resulting in shop rents in some areas face down pressure, so it is expected that the shop rent of the core area will fall by up to 5% in the second half of this year.
The Executive Director of DTZ and the Director of Hong Kong Shops Department, Lam YingWai expresses, the total number of visitors to Hong Kong in the first five months of this year increased by 14.9% year-on-year, the highest annual increase in nine years; The no overnight visitors number from the Mainland in the first five months also increased by 20.7% year-on-year, and the total mainland tourists number in May alone had increased by 10.4% compared with April, but consumption decreased even though the visitors number increased, with the retail sales volume had fallen for 4 months, the category of Jewelry and watches and clocks among had fallen the most during the first five months, down by 4.4% year-on-year.
The vacancy rate of shops in Hong Kong Central District rose to 8.6%.
Lam YingWai points out that, the decrease in consumption has affected rental increases in core retail areas; the quarterly increases in Tsim Sha Tsui and Mong Kok in the second quarter were 0.7% and 1% respectively, lower than in the first quarter; Causeway Bay rose by 0.7% quarter-to-quarter, while the rent in Hong Kong Central District continues to be suppressed, which fell 3% by quarter, nearly doubled from 1.6% in the first quarter. The vacancy rate of shops in Hong Kong Central District is further increased from 7.1% in the first quarter to 8.6% in the second quarter, while the vacancy rates in the remaining regions remained unchanged. Lam YingWai expects that the shop rents in the core districts will decrease by 1-5% in the second half of this year due to the impact of global economic and political shocks.
In addition to the Chinese restaurants, the business volumes of various types of restaurants have increased by 4.8-11.2% year-on-year. However, only shop rents in Tsim Sha Tsui and Mong Kok have recorded a quarterly increase of 0.4-0.9% in this quarter, while shop rents in Hong Kong Island continued to fall by 0.8-3%, reflecting the restaurants in Kowloon are more favorable under the fact of tourists especially the no overnight visitors continued increasing, and the rents there was supported to increase by 0.4-0.9% quarter-to-quarter, while less passengers willing to consume in Hong Kong Island continued to put pressure on the Hong Kong Island retail district.
Lam YingWai stresses that, the consumers are prudent under the influence of the external and local uncertainties, hitting the performance of Hong Kong shops market in the second quarter. It is expected that the overall market performance will remain dull in the second half of the year, but the business volumes of people's livelihood products such as cosmetics, personal care products, sports and leisure products are expected to be maintained, and shop rents in non-core areas are expected to be flat.
The average rent of office buildings fell for the first time in 5 years.
The Hong Kong Managing Director of DTZ, Shiu LeungFai expresses, the office rents of Class A offices in the Central District and offices in Wan Chai and Causeway Bay had declined since last quarter, the quarterly decreases of which expanded in this quarter to respectively of 1.2% and 2%; The rents in the Central District and Kowloon East fell respectively by 0.7% and 0.4%, while other districts saw growth, the increase of Hong Kong Island East among had the highest increase of 1.4%. However, the average rent of overall office buildings in Hong Kong was still dragged down and fell for the first time in five years, down slightly by 0.4% quarter-to-quarter. Shiu LeungFai estimates, the rents of Class A offices in the Central District and offices in Wan Chai and Causeway Bay will drop by 1%-4% in the whole year, while the rents in Hong Kong Island East and Kowloon East are expected to be flat or slightly up.
Shiu LeungFai mentions, the average rent of office buildings in Hong Kong fell in this quarter which is the first time in five years, due to the external uncertainties and the fall of the Class A offices in the Central District, Wan Chai and Causeway Bay.
However, the removals of multinational corporations increase in this quarter and the pre-leasing for new projects is ideal, making the office space occupation in Hong Kong increases from a negative data to about 498,000 sq ft in this quarter, but it has gradually declined from 1,050,000 sq ft in the first half of last year and the 868,000 sq ft in the second half of the year, because the leasing demand of Chinese-funded enterprises is weak, and multinational companies pay more attention to cost control under the influence of Sino-US trade friction.