The View | Hong Kong’s property sector is waiting for a recovery that never comes

Spare a thought for those upbeat property agents who have been insisting for some time that a recovery in Hong Kong’s battered commercial real estate sector is just around the corner.

While the big advisers’ views on the outlook for the market differ significantly, mainly due to mounting uncertainty over the prospects for Hong Kong and the global economy, the consensus towards the end of last year was that the downturn in the office and retail markets was bottoming out.

In December, JLL said the office market had “entered the last phase of the current down cycle and is on the cusp of a recovery”. CBRE, in its market outlook published in early January, noted that high street rents rose in 2021 for the first time in seven years, and said single-digit rental growth this year was achievable.

Yet, every time the recovery in Hong Kong’s property sector appears to be getting under way, the market suffers another relapse. An unprecedented succession of domestic and external shocks over the past three years has caused persistent delays to the long-awaited upturn.

As recently as early January, CBRE was expecting grade A office rents, which plunged almost 25 per cent in 2020-21, to remain flat this year. Fast forward three months, and it now anticipates a further decline of between zero and five per cent. In the retail sector, high street rents resumed their decline in the first quarter, dropping nearly six per cent quarter on quarter.

The draconian restrictions aimed at countering the brutal fifth wave of Covid-19 are just the latest shock to befall Hong Kong’s economy, causing shops and restaurants to shut down temporarily and slowing the pace of leasing activity in the office sector in February and March.