- With the support of improving market sentiment and the U.S. Federal Reserve’s rate cut, Hong Kong residential transaction numbers trended upwards in Q3 amid the current consolidation phase. Total residential transactions for the Q3 period reached 16,700 units, up 63% y-o-y, while home prices remained stable throughout the quarter.
- The Grade A office market recorded net absorption of 401,000 sq ft in Q3, the highest level since Q2 2019. Overall office rents declined by 0.8% q-o-q, although Prime Central subdistrict rents posted a modest rise of 0.6% q-o-q.
- The average retail high street vacancy rate in core districts dropped to 8.3% in Q3, with leasing activities most active in Causeway Bay and Mongkok. Overall high street retail rents gradually stabilized within a narrow range of ±1% q-o-q, with the full-year rental change now forecast in a range of -1% to -2% y-o-y.
The residential market sustained momentum in the quarter, supported by lower mortgage rates, a buoyant stock market, and developers’ active launches of primary market home sales at competitive prices. Monthly residential transactions exceeded 5,000 units during the quarter, bringing total residential sales in Q3 to 16,700 units.
In the Grade A office sector, boosted by a recovery in stock market confidence and initial public offering (IPO) activity, quarterly net absorption and new lease activities remained robust, with the Greater Central district outperforming. Overall office rents remained under pressure due to high availability, but Prime Central subdistrict rents showed early signs of recovery and edged up.
As for the retail sector, overall retail sales experienced some stabilization in the first two months of Q3, with an uptick of 2.8% y-o-y through July and August, while the overall year-to-date decline in retail sales narrowed. Average high street vacancy levels in core retail districts fell during the quarter, accompanied by mild q-o-q declines in core area high street rents.
Office Market Key Takeaways
- Office market quarterly net absorption reached 401,000 sf in Q3, the highest level since Q2 2019, underpinned by improved market sentiment brought on by a recovery in stock market confidence and IPO activity.
- The overall rental level decline narrowed to –0.8% q-o-q in Q3, while Prime Central rent stabilized, gaining +0.6% q-o-q.
- The recovery in IPO activity should help support market sentiment and downstream office demand, specifically from banking & finance and professional services firms.
- The rental level divergence between prime offices and other lower-tier spaces is set to become more pronounced, as the market increasingly focuses on high-quality office space.
- Cushman & Wakefield now forecasts the overall office rental level to drop in the range of 4% to 6% for the full-year 2025, amid an ample new supply pipeline while occupiers remain cost-cautious.
Retail Market Key Takeaways
- Overall retail sales performance showed signs of stabilization in Q3 with gentle m-o-m growth recorded since July.
- The overall retail market vacancy rate demonstrated a slight downwards trend, with leasing transactions relatively more active in Mongkok and Causeway Bay districts.
- Core high street retail and F&B category rental levels both experienced mild adjustments in Q3.
- Overall high street retail rents are expected to drop in a range of 1%-2% in 2025, and F&B rents to retreat 1%-3%.
- Recently announced "pet-friendly" policies from the government are likely to attract a broader customer base and enhance the overall consumer experience, in turn creating new growth opportunities for the retail and F&B sectors.
Residential Market Key Takeaways
- Residential market sentiment continued to be supported by the relatively low Hong Kong Interbank Offered Rate (HIBOR), relaxation of stamp duty, and active sales launches in the primary market.
- Residential unit sales momentum sustained through Q3, with S&Ps volume for the quarter climbing 63% y-o-y to reach 16,700 units.
- Cushman & Wakefield's small-to-mid size home price index rose 1.3% q-o-q, accompanied with a recovery in our verbal enquiry index.
- The full-year 2025 residential transaction number is now expected to rise in the range of 9% to 13% from the 2024 level to reach 58,000 to 60,000 units
- Cushman & Wakefield now anticipates that home prices will bottom out and are likely to have recovered gently in the range of by +1% to +2% y-o-y by the end of the year.
