Despite the near-term headwinds, Hong Kong remains an attractive investment hotspot in Asia Pacific and a broad-based market recovery is expected once PRC demand returns.

• Stronger economic bonds and greater connectivity with Mainland China over the past 25 years helped propel a multi-year rally in the Hong Kong’s property markets prior to the social unrest and COVID-19 pandemic. 
• A pandemic-induced hiatus has inevitably brought the retail market back down to earth, and rents have fallen close to pre-IVS levels.  The market is likely to see a slow ‘L-shaped’ recovery with prime street shop rents climbing back to 60% or 70% of their peak values upon the return of mainland shoppers.
• PRC demand has continued to drive leasing momentum in core Grade A office areas, showing resilience despite the pandemic. However, supply pressures ahead will reinforce the downward trend in both rents and capital values until 2024.
• While near-term uncertainties could negatively impact Mainland HNWIs' willingness to invest in Hong Kong, we believe their interest in the luxury residential market remains intact as the city is still an extremely attractive domicile in the GBA offering an international lifestyle and extensive air links. 
• The luxury residential leasing market is increasingly being driven by Mainland expats and ‘New Hongkongers’. The recent citywide lockdowns across multiple cities in China has prompted more people to move to Hong Kong to avoid possible confinement.  Looking forward, this group of renters should continue to support luxury residential rental growth. 
• Boosted by the growing demand from e-commerce and 3PL tenants, policy support and the limited supply of quality logistics facilities, the industrial and logistics market has continued to outperform other sectors in recent years. Cash-rich mainland Chinese logistics operators are looking to acquire mature properties to meet their expansion needs.