Hong Kong prime street shop rents drop 5% in Q1

Rents in major shopping malls also declined 5.1%.

Data from Savills reveals that overall prime street shop and major shopping centre rents in Q1/2022 plunged by -5.0% and -5.1% YoY respectively, dashing any optimism surrounding a recovery which emerged at the beginning of 2022. 

The research firm adds that the bleak investment landscape was reflected in the sharp decline in retail investment volume which was 23% lower YoY, at HK$7.3 billion over the first three months. 

Here’s more from Savills:

Nonetheless, all hope is not yet lost. A second consumption voucher scheme giving HK$10,000 to all permanent residents will kick off with the first HK$5,000 available from April 7th, offering some short-term relief to the sector. 

Logistics premises have generally remained unaffected by the ongoing uncertainties as the government and air freight served as the major demand drivers for warehouses over the quarter. A slight increase in overall and modern warehouse rents was recorded in Q1/2022, at 0.3% and 0.5% respectively. 

Investment prospects for industrial properties on the other hand have become increasingly conservative, with a significant drop in the number of transactions by 33% to 570 deals in Q1/2022. 

The rising cost of capital, alongside the ongoing COVID situation, has prompted a decline in prices even for warehouses - the most resilient industrial sub-type over the past year, which dropped by -0.1% in this quarter. 

The Grade A office market has been relatively quiet in Q1/2022, with little leasing and transaction activity as many chose to work from home during a fifth wave of infections. Overall rents and prices fell by -2.0% and -1.5% respectively throughout the quarter. 

The regulatory tightening of Chinese businesses and the frail IPO market have weakened demand for office space from the PRC firms. Together with the detrimental effect of the rigid COVID restrictions which resulted in an outflow of expats and corporate relocations, the conservative outlook is expected to persist throughout 2022.