(Updates with comment in the second paragraph.)
Dec. 6 (Bloomberg) -- Hong Kong’s prime office demand is expected to slow after rents climbed 16 percent in the first 11 months of this year, according the world’s second-biggest publicly traded commercial-property broker.
There’s “temporary pressure” on rental in the city’s core office district, Gavin Morgan, deputy managing director for Hong Kong at Jones Lang LaSalle Inc., said at a briefing today, adding that any rental correction will probably be “short- lived” because of tight supply.
The city dropped out of the top five places for real estate investment in the Asia-Pacific region for the first time in five years, according to a PricewaterhouseCoopers LLP and Urban Land Institute report today, which ranked Hong Kong 14th out of 21 among the region’s top investment destinations for 2012.
Prime office rents in Hong Kong have risen 60 percent since July 2009 as financial services companies expand amid increasing corporate finance activities by Chinese companies, according to CBRE Group Inc. Grade A office rents in Hong Kong reached $213.7 per square foot a year as of June, the costliest in the world, according to Colliers International.
“Many interviewees believe Hong Kong is a fully priced market,” Patrick Phillips, chief executive officer of the Washington-based Urban Land Institute, said in a media briefing in Hong Kong today. The shortage of land and high development costs means there’s “limited upside potential.”
Singapore was ranked the region’s top property investment destination for 2012 in the report, followed by Shanghai, Sydney, Chongqing in China and the capital Beijing, he said.
Office rents in Hong Kong may fall as much as 40 percent over the next two years if China goes through an economic “hard landing,” according to a Barclays Capital Research report in October. A hard landing would cause vacancy rates to rise to as much as 8 percent by 2013, while rents may fall 10 percent to 15 percent in a soft landing, it said.
The city’s housing transactions probably slid 37 percent to 85,000 this year, according to Joseph Tsang, managing director for Jones Lang LaSalle, and may dip to 80,000 next year. Luxury home prices and rents may fall between 5 percent and 10 percent in 2012, while mass-market housing values could decline 10 percent to 15 percent, he said.
Hong Kong’s prime rents for shopping malls climbed 12 percent in the first 11 months this year, while prime street retail rents rose 19 percent during the same period, Jones Lang LaSalle said. The city’s retail rents are expected to “stay strong” in 2012 as Hong Kong remains a key market for international brands, said Tom Gaffney, head of retail for Hong Kong at Jones Lang LaSalle.
--Editors: Linus Chua, Andreea Papuc
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