HK Office Price Drops May Moderate In H1 2021
HONG KONG – If the spread of COVID-19 is kept under control and inbound travel is gradually allowed, the price drops of Grade A offices in the Chinese territory could slow down in H1 2021, according to a report published by Savills on Monday (11 January).
“Assuming the virus situation improves in the first half of 2021 and borders are gradually reopened in the second half of the year, we forecast that both Grade A office and prime street shop prices will decline more moderately by 5 percent to 10 percent over the first six months of the year before stabilizing from Q3 onwards, with volumes likely to continue their upward trend in the first half of the year,” said the property consultancy in its report.
Savills also revealed that office transactions in Hong Kong recovered by 25 percent in December compared to the previous month. In particular, 49 properties priced up to HK$10 million each changed hands, up 69 percent from November.
“The attitudes of Grade A office landlords continued to soften and more keen sellers were successful in offloading their holdings, with end users and bargain hunters again dominating the office segment,” it noted.
The property consultancy noted that more offices were sold in core areas. There were deals priced under HK$30,000 psf and beyond that figure.
For instance, the American Chamber of Commerce divested 5 office units on the 19th level of the Bank of America Tower for HK$142 million at an average rate of about HK$23,800 psf. A Japanese entity also offloaded the 4th floor of the Far East Finance Centre for HK$237.6 million or HK$22,000 psf. Both average rates are recent lows for their respective buildings.
On the upper segment of the market, the 48th level of The Center was purchased by mainland Chinese developer Hopson for HK$980 million (HK$38,139 psf) through a stock transfer. While the psf price is a recent high, it’s 12 percent lower than the price paid for an office on the 49th floor 2 years ago. At Shun Tak Centre West Tower, a small office unit with unblocked sea views, changed hands at a recent high of HK$33,000 psf.
“These diversities in pricing reflected diverging views among office landlords and purchasers,” added the real estate consultancy.