Among retail sectors, Jewellery & Watches, Fashion & Accessories and Medicines & Cosmetics, popular product categories among tourists, continued to outperform, with y-o-y growth rates of 76.6%, 54.0% and 37.4%, respectively. Total retail sales from January to May totaled HK$171.9 billion, recording a significant y-o-y increase of 21.0% due to the lower base last year. Hong Kong's retail market has been gradually recovering thanks to the resumption of tourist spending. Retail Market - High Street Rents Improve as Vacancy Rates Further Decline, yet Larger Retail Brands Remain Wait-and-See relations, it is expected that the gradual return of the economy and cross-border activities will support business confidence and expansion plans, which could aid the office market to recover." With the recent signs of improving Sino-U.S. Overall office rents are expected to further adjust in 2H, with a forecast of a 5-7% decline for 2023. Looking ahead to 2H, several large new office buildings are expected to be completed, and this, added to the existing high office availability, has hindered the rebound in office rents. The increase in demand for medical/health/beauty and insurance services from mainland visitors since the border reopening has driven up office space requirements from these sectors. While the banking and finance sector still accounts for the largest share of newly leased space (25%), the medical/health/beauty, consumer products/manufacturing, and insurance sectors have each contributed more than 10%. John Siu, Managing Director, Head of Project and Occupier Services, Hong Kong, Cushman & Wakefieldstated: "In terms of new leasing transactions, the share of new transactions by area across business sectors was distributed more evenly in Q2. The overall availability rate has slightly increased from 17.1% in Q1 to 17.3% in Q2, in turn exerting further downwards pressure on Grade A office rents, which fell by 2.1% q-o-q and 3.6% YTD, with the most notable drop observed in Hong Kong East.
However, this is an improvement from the -248,200 sq ft recorded in Q1. Hong Kong's Grade A office market recorded net absorption of -172,700 sq ft in Q2, mainly due to downsizing by multinational companies during the quarter, notably in Greater Tsimshatsui and Greater Central. The office leasing market has not yet seen a significant rebound, while leasing activity by mainland enterprises in Hong Kong has yet to meet expectations. Overall business sentiment strengthened after Hong Kong fully reopened its border, although the return of cross-border activity to normalcy did not alleviate companies' caution amid an uncertain global economic outlook. O ffice Market - Net Absorption Still Negative in Q2 as Corporates Remain Cautious Home prices also started to fluctuate towards the end of the quarter. In the residential market, buyers have become more hesitant to enter transactions given the higher interest rates, leading to a 13% q-o-q decline in the number of transactions in Q2. The overall office availability rate rose slightly to 17.3%, further weighing on rental levels. However, the office leasing market has yet to see a notable rebound, with negative absorption continuing into Q2. Total retail sales reached $171.9 billion in the first five months of the year, up 21.0% y-o-y. Hong Kong's regular economic activity levels have gradually resumed as the city fully reopened its border, supporting a recovery of tourist spending in the retail market. Hong Kong Property Markets Review and Outlook 1H 2023 report. Media OutReach - 6 July 2023 - Global real estate services firm Cushman & Wakefield today published its Initial boost from border reopening on residential market fades, as high interest rate environment suppresses housing transactions and price performance Overall Grade A office net absorption in Q2 recorded -172,700 sq ft as leasing activity is yet to rebound significantly, some tenants taking advantage of lower rents for flight-to-quality moves
Retail sentiment continues to rebound, with high street rents maintaining low-single-digit growth, vacancy rates further dropping across districts, and pharmacy sector the most active for expansion
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