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. Sales of grade A offices were up in the first half before slowing down noticeably going into the second half, said JLL. The slowdown in the more recent months was due to a number of reasons, including the rising difficulty in obtaining bank credit, higher borrowing costs and signs of rental pressure in some sub-markets. In the retail market, JLL expects rental growth will slow next year. Although there had been a slowdown in the momentum of retail investment in recent months, JLL said capital values for main street shops rose a further 33 per cent after growing by 36 per cent last year. 'The growing uncertainties in the global economy may affect local consumption confidence in the near term, but the impact on luxury brands and other tourist-oriented trades should be minimal. Indeed, many international retailers are still looking for new set-up opportunities here,' the report said. However, rental growth was expected to slow in 2012. 'In general, we expect retail will continue to outperform other property sectors in 2012, with rents holding relatively firm,' said JLL Hong Kong's head of retail Tom Gaffney. 380% The rise in the number of watch and jewellery retailers in 2011 from 2010. Luxury goods shops still command high rents