The global property market has gone through one of its worst experiences since the 2008 global financial crisis. This has resulted in a massive collapse in real estate stock prices with some REITs falling under the same cosh. From the US all the way to Europe and Asia, no market has been spared and certainly not Hong Kong, one of the hottest destinations in the far east. 

COVID-19 and commercial property

Hong Kong has been one of the hardest-hit property markets with commercial real estate, in particular, witnessing a huge decline in rentals during the first half of the year 2020. According to property and investment management company Jones Lang LaSalle Inc. (NYSE:JLL), Hong Kong’s commercial property went through a corrective decline that saw rentals fall by more than 13% during the first half of the year. 

This was partly due to the adverse effects of COVID-19 which affected the demand for office space in Hong Kong. Many businesses have been forced to close shop while others have had to trim their workforce, which in turn reduces their demand for Office space. In other situations, many people continue to work from home. As such, businesses have adapted by reducing the excess rental office space.

The heightened sociopolitical crises and public health requirements also resulted in a 54% rise in housing foreclosures in Hong Kong. As such, the declining demand for property appears to be clearly affecting both commercial and residential real estate.

Where are we at and will things improve? 

However, according to a report published by JLL in August, things could change for the better going into the tail end of the year. According to the report, “new lettings in terms of floor area in the overall Grade A office market dropped by 53% in the first half of this year as compared to the same period last year.” 

It also adds that “the vacancy rate in the overall Grade A office market hiked to 7.6%, the highest level since September 2009 due to the weakened leasing demand.” Corporations are holding off on the decisions concerning office property due to COVID-19. 

This could change as we continue to gain more information about the behavior of the highly contagious virus. Currently, it looks like various countries across the globe are beginning to manage the spread well, with fewer fatalities reported as compared to the early periods of the pandemic.

Many countries are also learning to co-exist with the virus, continuing with their lives without having to stay locked in-doors. This could result in a sharp recovery of the global economy and with it the Hong Kong property market.

Conclusion

In summary, the Hong Kong property market is experiencing the same symptoms that can be found across the globe. Corporations are taking longer than usual to decide whether or not to take up additional office space. On the other hand, foreclosures are on the rise amid the economic challenges created by the coronavirus pandemic.

Hong Kong’s commercial property market has hit levels last witnessed in 2009, but things could become better soon with the progress made in tackling the pandemic.