Hong Kong Office and Retail Investment - Jan 2021

The market found more momentum in the fourth quarter in both the office and suburban retail segments.

• There was a significant increase in en-bloc / site sales in 2H/2020 (a 76% increase in volume and 353% increase in value compared with 1H/2020), despite a volatile virus situation and an uncertain economic outlook, though the market has not returned to its peak of 2017/18.
• Strata-title sentiment was again subdued with the Employment Support Scheme (ESS) ending in November and the outbreak of the fourth wave of COVID cases shortly after jeopardizing SMEs’ business prospects, but the cancellation of Double Stamp Duty (DSD) turned sentiment around in December, especially at the lower price band below HK$10 million which saw a significant rebound in volume.
• Attitudes of Grade A office landlords continued to soften, and more motivated sellers were successful in offloading holdings, with end users and bargain hunters again dominating the otherwise quiet office segment.
• Suburban retail prevailed with the relatively unscathed supermarket / wet market segments attracting investment interest.  While the retail sales decline moderated the holding power of most core retail landlords meant that substantial pricing gaps have persisted with very little happening in core retail areas as a result.
• A reopening of the border will be crucial to facilitate both visitor and capital flows to the benefit of both the retail and office investment markets.  With the macro environment in the region, and China in particular, expected to improve swiftly in 2021, Hong Kong stands to benefit if the virus is successfully brought under control.