Prime office space rent predicted to jump 5.6%

But retail rents are likely to drop.

The Q1 2017 RICS (Royal Institution of Chartered Surveyors) Hong Kong Commercial Property Monitor revealed that the Occupier Sentiment Index (OSI) rose to minus one in Q1 from minus 11 in the previous quarter, and the Investor Sentiment Index (ISI) rose to nine in Q1 from zero in Q4 2016.

In the occupier market, the results show that demand for office space remains robust, but industrial and retail property demand remains flat. The Q1 2017 data shows headline demand in the investment market continued to increase at a modest pace, largely driven by the office segment. Demand for industrial and retail properties was flat.

"Rentals and sales in the office market remain buoyant and high demand for prime office space has led to record-high prices", said Frank Wong MRICS, RICS Hong Kong External Affairs and Public Concerns Committee Member. "As for retail, primary markets will suffer a downward adjustment as businesses, such as luxury jewellery and watch retailers, continue to experience a consolidation stage".

Capital value forecasts for the next year remained extremely nuanced, with office space expected to outperform other segments in the prime and secondary markets. Office rents are expected to continue to outperform over the next twelve months, with prime space expected to see rents increase 5.6 per cent. Respondents are anticipating a 3.6 per cent and 2.5 per cent pullback in prime and secondary retail rents, respectively.