Greater Central Rentals to Fall by 25% – Steepest Drop since Global Financial Crisis in 2008, Athleisure Sector to Grow as Post-Pandemic New Trend

• Overall
  office rental dropped for a consecutive sixth quarter
• Office availability
  climbed to 11.6%, the highest level since 2005
• Retail sales remained weak with
  Causeway Bay retail vacancy rate hitting a record high
• F&B sector demand is still
  under the recent impacts from COVID-19; athleisure sector will grow exponentially
  into a post-pandemic new trend�

HONG KONG, CHINA - Media
OutReach - 6 October
2020 - Office rentals extended their declines in Q3, for a sixth consecutive
quarter, with the average rent in Hong Kong overall falling 4.7% q-o-q and
13.9% YTD. The drop was largely driven by rental decline in Greater Central
(down 6.3% q-o-q and 16.9% YTD) and Wanchai/Causeway Bay (contracted 5.2% q-o-q
and 15.0% YTD). As the leasing market is expected to remain weak through
year-end, office rentals in Greater Central and Wanchai/Causeway Bay are forecast
to drop by as much as 25% and 23%, respectively, for the full year of 2020.

 

As occupiers continue
weather a challenging business environment, net absorption fell by the most ever
on record, by -633,000 sq ft (net floor area), in the fourth consecutive
quarter of negative absorption.  Combined,
negative absorption over the first three quarters of 2020 totalled 1.7 million
sq ft. Total office space surrendered reached 626,000 sq ft in Q3, representing
another 8% increase from Q2 2020. As a result, the overall
availability rate climbed to 11.6%, with highest availability recorded in
Kowloon West and Kowloon East, of 16.6% and 14.9% respectively. 

 

Mr. Keith Hemshall, Cushman & Wakefield’s
Executive Director & Head of Office Services, Hong Kong, commented, “Of the total, 70%
space was surrendered by multinational corporations.
This upward trend is expected to continue for the remainder of 2020. However,
there are also cases of tenants capitalising on this opportunity to upgrade
their office environment or to relocate within the same district at a more
competitive rate”.

 

Mr. John Siu, Cushman & Wakefield’s Managing
Director, Hong Kong, commented, “One of the key
findings from our 2020 Office Occupier Survey, 65% of respondents are planning
to allow working from home on a long-term basis. While that’s certain to alter
the office leasing landscape, we do not necessarily see it having a major impact
on office demand in the long run. It is likely that much of the work from home
will be part-time, perhaps one to two days a week. In addition, as firms look
to allow more social distancing within the office, many may look to working
from home to offset the need to add to their office footprint.”

 

The retail market continued to be hard-hit
by the pandemic and a third wave of COVID-19 cases in Hong Kong. As the latest
wave prompted the tightening of social distancing measures, retail sales
remained weak, totaling HKD 52.02 billion in the first two months of the third
quarter combined, a decline of 18.5% year-on-year. With Mainland visitors a
major pillar of retail spending, the on-going border closures continued to
severely impact retail sales. Jewellery and watch sales dropped by 47.4%
year-on-year while medicines and cosmetics sales fell by 47.3% over the same
period.  

 

Retail rentals continued to decline,
though at a lower pace as compared to past quarters. The sharpest declines in
retail rentals were recorded in the areas of Causeway Bay and Central, recording
declines by 7.9% and 7.8% quarter-on-quarter, respectively, and by 41.3% and
40.8% respectively, year-to-date.

 

Vacancy rates across all major shopping
districts were in the double-digits, with those in Causeway Bay climbing
sharply to 13.2%, from 7.9% the previous quarter. Meanwhile, rental declines
for F&B spaces in Q3 showed signs of slowing, but remain down by around 30%
year-to-date across all districts.

 

Mr Kevin Lam, Cushman & Wakefield’s Executive Director, Head
of Retail Services, Hong Kong,
commented, “Among the major new leases that took place during Q3, we saw a
major contribution from athleisure brands, representing a possible new trend
post-pandemic that may dominate the market and drive the market recovery in the
near future. With the community becoming more health-conscious while at the
same time spending more time at home, we see great opportunities for athleisure
brands to gain ground in this fast-adapting market.”

Please
click HERE
to download the event photo.

Photo
Caption
From Left to Right: Mr Keith Hemshall, Cushman & Wakefield’s Executive
Director, Head of Office Services, Hong Kong, Mr John Siu, Cushman &
Wakefield’s Managing Director, Hong Kong and Mr Kevin Lam, Cushman &
Wakefield’s Executive Director, Head of Retail Services, Hong Kong

About Cushman & Wakefield

Cushman
& Wakefield (NYSE: CWK) is a leading global real estate services firm that
delivers exceptional value for real estate occupiers and owners. Cushman &
Wakefield is among the largest real estate services firms with approximately
53,000 employees in 400 offices and 60 countries. Across Greater China, 22 offices
are servicing the local market. The company won four of the top awards in the
Euromoney Survey 2017, 2018 and 2020 in the categories of Overall, Agency Letting/Sales,
Valuation and Research in China. In 2019, the firm had revenue of $ 8.8 billion
across core services of property, facilities and project management, leasing,
capital markets, valuation and other services. To learn more, visit www.cushmanwakefield.com.hk or follow us on LinkedIn (https://www.linkedin.com/company/cushman-&-wakefield-greater-china)