Can coronavirus outbreak knock Hong Kong retail and office markets, the world’s priciest, off the perch?
- M&G Real Estate expects to see at least a 30 per cent slide in prices from 2019 peak through 2021
- No evidence to suggest prices are about to fall below the levels in New York or London West End, Knight Frank says
Hong Kong’s office and retail space rents, the world’s priciest, have slipped under the weight of US-China trade war and anti-government protests for most of the past year. Can the fallout from a prolonged coronavirus outbreak knock them off the perch?
The viral outbreak has taken its toll even before the local economy can recover from the onslaught last year as shoppers avoided crowded areas like shopping malls and major businesses asked employees to work from home, while hotel operators could cut as much as 40 per cent of their headcount on plunging occupancy.
Tokyo has usurped the city as the region’s biggest commercial real estate market, while CBRE forecasts a 15 to 20 per cent rental correction in the core retail districts this year. Mainland tourists, the lifeblood of Hong Kong’s tourism and retail industry, have stayed away amid anti-mainland sentiments last year. Now, the flow could come to a halt amid lockdown and widening border controls.
The average price for high-street shops in Hong Kong’s core shopping areas fell 16.9 per cent last year to HK$161,356 per sq ft, according to consultancy JLL, while the average capital value of Grade A office space in Central fell 6.3 per cent in the second half of 2019 to HK$40,100 per sq ft.
Singapore-based Hsu predicts retail and office rents could slip by at least 30 per cent from their peak levels in 2019 through 2021. “I would be more cautious about expecting a V-shaped rebound.”
The coronavirus outbreak has so far infected more than 20,000 people and claimed at least 426 lives, mostly in mainland China, according to the latest official tally. Global airlines are halting flights to mainland China or barred flights from the country in line with widening border controls.
“The [outbreak] is expected to have a big impact on rental and sale prices for retail floors and office space,” said Maggie Hu, assistant professor of real estate and finance at the Chinese University of Hong Kong. “This may aggravate the economic downturn.”