Colliers International, Hong Kong

Colliers International announced its positive 12-month forecast for the Hong Kong property market at its biannual press conference today.  However, there has been a major revision from the projections in January 2008, with the overall growth across all property sectors narrowing down.

Colliers International: 2008 Forecast for Hong Kong's Property Sectors (May 2008 – May 2009 % Increase YoY)

The past six months have seen the growth rate tapering off.  The number of sales transactions in most sectors fell at a considerable rate, though prices maintained a moderate growth.  Strong occupational demand allows rentals to stand firm and generate a higher growth than capital values. 

Commercial Leasing

In the first half of 2008, the average Grade A office rentals sustained to rise.   The hiring expectations remained positive, particularly in legal sector, acting as a solid support on the demand of Grade A office.  However, the growth of average Grade A office rentals in 2Q 2008 was 4.9% quarter-to-quarter (QoQ), tapering off from that of 15.3% QoQ in 1Q 2008.  

Individual companies including professional firms hesitated to commit new space in Central since the prevailing rental had already surpassed their affordable levels.  Some of them began to consider relocation to fringe areas on Hong Kong Island, where rental in these areas is generally cheaper than that in Central. 

"Since rentals in the fringe business areas e.g. Causeway Bay on Hong Kong Island remained at a steep discount of over 50%, comparing to the rental in Central," said Piers Nickalls, Director of Commercial, "a number of non-finance companies would seriously consider relocation from Central for potential rental savings as well as the availability of floor space to meet their requirements."

In the second half of 2008, there will be more new stock available to ease the current supply squeeze, for example, Nexxus Building (over 264,000 sq ft) in Central and the first phase of Kwai Chung Town Lot 215 (approximately 600,000 sq ft).  In anticipation of more office stock coming on line and the trend of relocation from Central to fringe districts on Hong Kong Island, the Grade A office rentals are forecast to slow to 15% in the next twelve months.

Investment Sales

In the investment market, there was a significant drop in both the number and value of transactions during 2Q 2008.  For property over HK$30 million, there were 144 transactions in the first half of 2008, 20% lower than the same period of 2007.  The total transaction value amounted to HK$16,645 million, which represented 47% YoY drop.

"The overall economic uncertainty and the credit crunch in the United States have taken their toll on the investment sector," said Antonio Wu, Regional Director, Investment Sales. "Overseas investors still have interests in the real estate market in Asia.  But sustained yields compression and credit availability remain the key concern."

Luxury Residential

In the luxury residential sector, the general market sentiment was dampened by the sustained volatility of global financial markets, leading to a slowdown in the number of sales transactions.  "Thanks to the sustained occupational demand and a lack of supply," said Ricky Poon, Executive Director of Residential Sales, "The growth momentum remained positive and is expected to increase 5-10% in the next twelve months."  Meanwhile, the luxury residential rental also saw an encouraging growth in the first half of 2008.  In addition to the growing occupational demand coming from the finance industries and professional services sector, expectations of growing inflation sets a pressure to push the luxury residential rental further higher.  Colliers International forecasts the luxury residential rental to grow 15% in the next twelve months. 

Industrial

In the Industrial sector, the demand for logistics warehouses remained strong.  As the fuel cost continued rising, more operators prefer to outsource their logistics functions.  With the capital value rising further than that of rentals, the industrial investment yields for quality warehousing premises fell to below 5%.  In the next twelve months, the industrial rental growth is forecast to see a steady growth of 8%.  

Retail

Meanwhile, the retail market saw an encouraging growth in the first half of 2008.  Underpinned by the solid local fundamentals, for example, the low unemployment rate and rising household income, retail sales have seen sustained encouraging growth.  In the leasing market, demand for quality shops by sizable retail brands remained strong.   The shops at prime location at high streets are sought-after by international brands.  In the next twelve months, the rental and capital value of ground floor shops in core areas are both expected to rise 15%. 

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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 293 offices in 61 countries.  In Asia Pacific, Colliers has 62 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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