Hong Kong office and retail rents will ease in the first half of next year, as employers and some local retailers become wary of expansion against the backdrop of a gloomy economic outlook, according to property consultancy Jones Lang LaSalle.
In its just-published Hong Kong Real Estate Market Review 2011 JLL said growing global economic uncertainty hampered expansion demand from the middle of the year. In the present low-vacancy environment, this resulted in a relative slowdown in net absorption of office space.
The overall net take-up of grade A office space in the first 11 months of the year was 1.9 million square feet, a marked decline from the net 3.5 million square feet in 2010.
'Given the gloomy economic outlook, companies remain cautious towards expansion, which will curb office demand in the short term and put temporary pressure on rentals in core business districts,' the report said.
However, JLL's deputy managing director and head of leasing in Hong Kong Gavin Morgan said given the tight supply pipeline and low vacancy environment, the rental correction was likely to be short-lived. 'In fact, we expect the correction to stabilise in the second half of next year, and Hong Kong will likely be included in the first batch of cities to see a rebound,' he said.
The fourth quarter saw average rents in Central softening, pulling rents in the overall market down marginally by 1.1 per cent. But over the first 11 months rents in the overall market were still up by 16.4 per cent, while those in Central increased by 12.2 per cent.
The strongest rental growth was seen in Hong Kong East where it was up 25.2 per cent, and Kowloon East, up 23.1 per cent. In both districts landlords continued to benefit from strong cost-saving relocation demand throughout the year.