Hong Kong's office sector should see strong rental growth after last year's low prices and improved economic development. However, slow expansion in the finance sector may hinder its long-term growth potential, according to investment bank JP Morgan. 'We think the biggest risk to a strong Hong Kong office market, particularly in Central, is a slowing finance and services sector,' the bank said in its recently released research report. JP Morgan said job growth in the finance and services sector had been non-existent as the economy picked up from September last year to June this year. Most of the job growth in this cycle has been in the import/export and transport industries, which traditionally are not prime office space occupiers. According to Knight Frank, rents in Central have been growing at the fastest pace so far this year, with the average now at $30.85 per square foot per month, rising 6 per cent from July. JP Morgan analyst Douglas Sung said: 'Over time, retail rental growth will be more sustainable.' JP Morgan said the retail property sector was best placed for the economic recovery happening now. Landlords with prime retail properties should have strong pricing power with continued healthy tourism growth. The increasing numbers of Chinese tourists coming to Hong Kong would also help boost prices. Hong Kong retail rental growth was less volatile and most sustainable due to the structural change in the local economy, the investment bank said.
