Hong Kong is poised for a global economic recovery
Long known as one of the world’s leading financial centers and home to the world’s fourth largest stock exchange, Hong Kong is a buzzing metropolis ideally positioned as the main Gateway to China.
As a major financial center Hong Kong has been affected by the global economic downturn, although, it still supports the greatest concentration of corporate headquarters in the Asia Pacific region and is the beneficiary of incoming groups establishing a presence from which to springboard into China. As the consumer market for the future, global focus on China has led some banks and consumer goods companies to reallocate headcount to Asia from their U.S. or European offices, which in turn has somewhat dampened the rise in unemployment. Nonetheless, all real estate rentals and capital values have declined by approximately 30% in the first half of 2009, bringing some relief to tenants but reducing overall sales volume in each sector.
Though Office vacancy rates in the CBD have increased 5% and are continuing to rise, they remain modest and tempered by corporations looking to expand into Hong Kong, which remains a focal point for regional headquarters. No new major Class A office projects are expected in the core CBD, though several secondary districts have evolved as lower cost alternatives.
Outsourcing to China over the past 15 years has greatly reduced the size of the Industrial market. Coupled with the economic downturn and its direct impact on the trading sector, this reduction has led to a decline in demand for industrial property, specifically in the trading and logistics sectors. However, capital values for large industrial properties have been supported by speculative investors looking for re-zoning or value-added opportunities.
Retail rents have suffered the largest decrease on record. As a point of reference, the Asian Financial Crisis/SARS only led to 10-20% rental declines, while retail rents have declined 30% in the last 12 months and high vacancies suggest further softening.
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