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Jones Lang LaSalle: More vacant offices in H2

The possible halt of gaming operators using local offices may drive an increase in the vacancy rate of the office property market.

The city may see more offices left vacant for the rest of the year due to companies’ cost cutting policies and gaming corporations’ relocations of their offices to their new gaming projects, said Jones Lang LaSalle (Macau) Ltd. yesterday in its mid-year review and forecast. For the first half of the year, the real estate service firm saw the overall rental values of local offices fall 20.3 per cent compared to the same period of last year. Meanwhile, Grade A offices posted a year-on-year fall of 14.5 per cent in their rents. “With several major gaming facilities completed in the second half of 2016, we expect to see some gaming operators relocating their operations from the existing offices to the new projects. This may lead to a rise in office vacancy rate,” the firm’s associate director of capital markets, Alison Yip, said in a press briefing yesterday. As at the end of June, the overall office vacancy rate in the city went up slightly to eight per cent from six per cent one year ago, with office supply remaining at a low level, Ms. Yip said. According to her, the decrease in office rental values is pressured by “the weak investment sentiment and cost cutting policies adopted by some corperates” amid the economic adjustment phase, coupled with a notable decline in demand from offshore companies and gaming-related operators. The property index of JLL Macau also shows the capital values for the overall office market in the city decreased by 25.1 per cent year-on-year during the first half, whilst that for Grade A office market was down 24.4 per cent year-on-year on average. “Currently, the market is in the tenants’ favour and they are enjoying a bigger bargaining power,” Ms. Yip said, adding “some companies may consider upgrading their office environment by committing to a bigger space at a relatively lower rental”. Shop rents discounted The retail property market was under pressures during the first half of the year, as well, said Oliver Tong, the firm’s associate director of retail. For the first six months, the overall rental in the city’s retail property market was slashed by 18.6 per cent year-on-year, whilst the capital values of the market plunged by 23.6 per cent year-on-year, according to the firm’s retail index. “Some landlords became more flexible in rental negotiations and were willing to offer tenants a relatively big discount in rental,” Mr. Tong indicated yesterday. But the fall in the rental values, nevertheless, had attracted at least 10 leasing transactions in major tourism areas in the period, such as Senado Square, he added. According to the retail market-focused property agent, nearly half of these transactions were supported by cosmetic retailers, followed by sportswear retailers. In addition, they include international crystal jewellery retailer Swarovski’s leasing deal for a standalone property in Senado Square, which used to house McDonald’s, for a monthly rental of some HK$1.3 million (US$162,500). “Macau’s retail landscape is expected to become more sophisticated and comprehensive upon completion of the other new major facilities such as Wynn Palace and Parisian Macao in the second half of 2016,” Mr. Tong forecasted. Home rents dive Meanwhile, JLL’s residential index indicated that the rental values in the local luxury home market plunged by 29 per cent year-on-year during the first half of the year. The firm’s head of residential in Macau, Jeff Wong, explained the drop was driven by the decline in the number of blue cards granted to expatriates engaged in the professional sectors. In addition, the rental values for mass-to-medium residential property also fell by 24.6 per cent year-on-year in the period due to the increase in new housing supply in 2015, the real estate agent said. For sales market, capital values for high-end and mass-to-medium residential properties respectively decreased by 15.4 per cent and 14.7 per cent compared to the first half of 2015, according to the company’s data. “With the low unemployment rate in Macau and the new gaming facilities scheduled for completion in 2016, we expect the residential prices will remain stable at the existing level with only minor fluctuations in the second half of the year,” Mr. Wong predicted.

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