Luxury retail rents feared to slide by another 5%

Even sales and prices are to go downhill.

Throughout 2015, it has been noted that while demand in most submarkets is expected to revive, the future relationship between Hong Kong and China, as well as how major investors perceive Hong Kong, could become key factors dictating movement in the office market.

According to a research report from Savills, overseas investors may demand an increased risk premium for Hong Kong if the current disruption worsens, resulting in higher cap rates and lower prices.

To date, Savills has noted very little direct impact on values, although some increase in investment volumes has been recorded as vendors have proved more flexible in negotiations.

Here's more from Savills:

Divided opinions on the political future can sometimes spur market activity as the bid-ask spread tends to narrow considerably. Generally, however, we expect a fairly stable office market for 2015.

In 2015, with a revision of IVS on the cards (most likely implying more restrictions on the current multipleentry policy) and a possible decline in Mainland spending in response to anti-corruption measures and slower growth, we expect luxury retail sales to continue to slide, with both retail rents and prices to decline by another 5% to 10%.