Hong Kong Property Index

Preliminary Summary July 2014 (2Q14)

Supported by low vacancy rates, most rental markets continued to push forward despite underlying weakness in demand. Capital
values held steady, buoyed by en-bloc purchases of owner-occupiers, including Citis acquisition of the East Tower of One Bay East
office development in Kwun Tong for market leading HKD 5.4 billion.
Residential
Office

A subdued leasing market contributed to net take-up amounting

to just 15,500 sq ft (net) in 2Q14, down from 303,200 sq ft (net)
recorded in the previous quarter.
In Central, leasing demand continued to be largely supported by
smaller requirements. Nevertheless, Central was the strongest
performing submarket with net take-up amounting to about
79,600 sq ft (net); largely on the back of expansion and
relocation requirements from the banking and finance sector.
Increasing competition from industrial building refurbishment
projects and landlords shifting properties from the sales to
leasing market led to rental decline in Kowloon East. All other
office submarkets, however, recorded slight rental growth.
Two government sites were made available for sale via public
tender in 2Q14. First Group Holdings won the tender of a site in
Cheung Sha Wan for HKD 1.0 billion (AV HKD 5,177 per sq ft,
gross). A second site, located at 15 Middle Road in Tsimshatsui
with a site area of 28,309 sq ft and maximum buildable GFA of
about 339,700 sq ft was put on the market on June 27.
Citigroup purchased the East Tower of One Bay East in Kwun
Tong from Wheelock Properties for a record HKD 5.4 billion
(HKD 10,600 per sq ft, gross), marking the largest single office
transaction in the city.
Q-o-Q Changes
Overall
Central
Wanchai/Causeway Bay
Tsimshatsui
Hong Kong East
Kowloon East

Capital Values

Rents

0.4%
0.4%
0.1%
0.3%
0.4%
0.8%

0.8%
1.2%
0.6%
0.9%
1.0%
-1.4%

Q-o-Q Changes
Luxury
Mass

After a fast start to the year, total tourist arrivals grew by a more
moderate 10.9% y-o-y in April-May. Tourist arrivals from
Mainland China also slowed, growing by 13.9% y-o-y in AprilMay after growing by 20.0% y-o-y in 1Q14.
The slowdown in tourist arrivals along with a high base of
comparison contributed total retail sales declining by 9.8% y-o-y
in April the sharpest year-on-year drop in a month since
February 2009 trimming year-to-date growth to 0.7% y-o-y.
With retail sales slowing, retailers adopted a more pragmatic
approach towards real estate decisions though demand for
shops in prime locations along High Streets remained intact.
Despite a slowdown in leasing activity and rental growth,
investment volumes recorded a slight pick-up in 2Q14 with
larger sized premises in non-core locations with upgrading
potential drawing the greatest interest.
Q-o-Q Changes
High Street Shops
Overall Prime Centres
Premium Prime Centres

Capital Values

Rents

0.5%
N/A
N/A

0.2%
0.1%
0.2%

Capital Values

Rents

-0.3%
0.0%

-2.3%
N/A

Industrial

Retail

The government relaxed conditions associated with the Double

Stamp Duty (DSD) policy in 2Q14. Under the changes, secondhome buyers can seek a refund of the DSD if the old flat is sold
within six months of the conveyance date rather than the
agreement for sale and purchase date of the new flat.
Market activity picked up in April and May, albeit off a lower
base of comparison with average monthly home sales reaching
5,026 transactions, up from the 3,596 in 1Q14 and 3,814 in
2Q13.
Nonetheless, demand for luxury units remained soft, with
preliminary data showing 49 properties priced above HKD 50
million being traded, down 9.3% q-o-q and 5.8% y-o-y.
Activity was largely driven by sales in the primary market as
developers continued to offer discounts to attract the interest of
buyers.
Eight residential sites were sold via government public tender for
a combined HKD 9.4 billion in 2Q14.
Luxury rents continued to trend lower with leasing activity in the
top-end of the market remaining subdued.

Led by a pick-up in trade with advanced economies and the

Mainland, the total value of exports and imports grew by 1.7% yo-y and 3.1% y-o-y, respectively, in April-May; a slight
improvement on the growth recorded in 1Q14.
The on-going trend by companies to outsource more of their
supply chain to 3PLs along with improvements in the external
trading environment underlined demand for warehousing space
in 2Q14. As a result, vacancy rates remained low despite rentals
being at record high levels.
Japanese 3PL operator, Konoike Transport leased 58,500 sq ft
in Gateway ts, Ungert Line leased an additional 25,900 sq ft in
Tai Hing Industrial Building and OM Log (Asia) expanded a
further 53,000 sq ft in Western Plaza.
Demand for warehousing space near the Kwai Chung container
port remained strong; especially for properties with floor plates
over 40,000 sq ft and monthly rentals below HKD 10 per sq ft.
Bonjour acquired the whole of Harrington Building in Tsuen Wan
for HKD 490 million (HKD 2,189 per sq ft). The local cosmetics
retailer plans to self-occupy and hold the property for long-term
investment.
According to local press, logistics property fund Goodman, is
reportedly negotiating the purchase of Central Textiles a group
of five low rise industrial buildings in Tsuen Wan for about
HKD 1 billion. The existing buildings will likely be redeveloped.
Q-o-Q Changes
Warehouses

Capital Values

Rents

4.7%

3.1%

The information in this publication should be regarded solely as a general guide. Whilst care has been taken in its preparation no representation is made or
responsibility accepted for the accuracy of the whole or any part.

For more information, please contact:

Denis Ma
Head of Research
Hong Kong
denis.ma@ap.jll.com
+852 2846 5135
Jones Lang LaSalle
+852 2846 5000

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permission from Jones Lang LaSalle. The information in this publication should be regarded solely as a general guide. Whilst care
has been taken in its preparation no representation is made or responsibility accepted for the accuracy of the whole or any part. We
stress that forecasting is a problematical exercise which at best should be regarded as an indicative assessment of possibilities
rather than absolute certainties. The process of making forward projections involves assumptions regarding numerous variables
which are acutely sensitive to changing conditions, variations in any one of which may significantly affect the outcome, and we draw
your attention to this factor.

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