The RICS (Royal Institution of Chartered Surveyors) Hong Kong Commercial Property Monitor Q4 2017 indicated a continued increase in sentiment for the occupier and investor markets. The Occupier Sentiment Index (OSI) climbed three points from the previous quarter to ten. The Investor Sentiment Index (ISI) increased modestly from 12 in Q3 to 13 in Q4.
Demand continued to rise in the occupier market while the headline net balance remained at 22 per cent in Q4. The office, industrial, retail market segments remained relatively unchanged from Q3. Survey respondents continued to report an increase in the supply of office and retail properties available to let, but the availability of office properties declined.
In the investment market, headline investor demand remains robust, as a net balance of 26 per cent of respondents reported an increase, up from 22 per cent in the previous quarter. Demand for office and industrial space continued to increase at a firm pace, while demand for retail properties was unchanged. The supply of office and retail properties and office development starts were reported to have increased during Q4.
"The strong demand for Grade A office space is largely driven by mainland China's investment and finance sector companies that are actively expanding their businesses in Hong Kong," said RICS Surveyor Frank F Wong. "Hong Kong provides a financial hub as a leading IPO fundraising centre and continues to be recognised as world's freest economy. Many foreign financial banking intuitions are relocating their operations from Central to Hong Kong East and Kowloon East. As firms are displaced from prime locations, demand for secondary office space receives a boost, resulting in an increase in capital value and rent support."
Respondents were more bullish on the one-year outlook for capital values, with the headline forecast being revised up to 3.3 per cent in Q4 from 1.8 per cent in Q3. Headline rents are expected to increase 2.6 per cent over the next year, up from 1.5 per cent in the previous quarter.
The RICS Hong Kong Commercial Property Monitor is a quarterly sentiment index tracking trends in the commercial property market. It is a leading indicator for global investment and occupier markets. The full report is available at www.rics.org/economics.