Despite the economic downturn, Macau's property sectors are growing.

According to JLL's Macau Mid-Year Property Review and Forecast, which was published today, the Macau property market continued to consolidate in 1H16, albeit at a slower rate, after the city's gaming revenue fell for the 25th consecutive month. real estate agents in qatar

 

In June 2016, Macau's gaming revenue dropped to MOP 15.88 billion, the lowest amount since 2010. The fall in Macau's gaming revenue has slowed, according to DICJ estimates, and it totaled MOP 107.8 billion for the first half of 2016, down 11.4 percent year on year. The share of gaming revenue generated by the mass market versus the overall market rose from 36.3 percent in 1Q14 to 45.1 percent in 1Q16, while the share of gaming revenue generated by the VIP market dropped by 19.3 percent y-o-y.

 

Macau's total GDP was MOP 79.95 billion in the first quarter of 2016, down 13.3 percent year on year. Fixed capital formation in Macau dropped by 31.4 percent y-o-y to MOP 15.12 billion in 1Q16, thanks to the completion of part of the new gaming facilities in Cotai. Private consumption expenditure was MOP 22.31 billion during the same time, down 2.3 percent year on year.

 

Macau's tourist arrivals totaled 12.406,000 in the first five months of 2016, down 0.8 percent year on year. Mainland Chinese tourists continued to dominate, accounting for 66.3 percent of total tourist arrivals, while Individual Traveller Scheme (ITS) travelers accounted for 46.6 percent of total Mainland Chinese visitors. In Macau, the total number of hotel rooms is 32,000, with 20,500 of those in the five-star hotel category. The overall occupancy rate in Cotai has dropped to 78.0 percent due to the opening of new hotels. As of May 2016, the average duration of stay for guests remained constant at 1.4 nights.

 

In the first half of 2016, the labor market in Macau remained relatively stable. According to the DSEC, the unemployment rate stayed low in May, at 1.9 percent. In 1Q16, the total median monthly income stayed at MOP 15,000, which was unchanged from the previous quarter. Total resident deposits dropped by 6.2 percent y-o-y to MOP 451 billion in April 2016. As of the end of May, the number of imported workers in Macau had reached a new high of 182,344 people, up 1.6 percent year on year. With many gaming facilities set to open in the first half of 2016 or after 2016, the number of imported workers is expected to continue to rise, but at a slower rate.

 

"Despite the fact that Macau's economic indicators grew at a negative pace in the first half of 2016, the decline has been moderated, and the city's economic fundamentals remain strong. We expect the property market in Macau to improve in the second half of 2016, despite the economic transformation "JLL Macau's Head of Residential, Jeff Wong, commented.

 

Office Market in Macau

 

Due to poor investment sentiment and cost-cutting policies introduced by some corporations, the office market in Macau continued to slow in 1H16. The total number of new incorporations registered in Macau during the first four months of 2016 was just 1,476, a decrease of 29.3% year on year. In reality, most industries saw a significant drop in the number of newly registered businesses.

 

Owing to a sharp drop in demand from offshore companies and gaming-related operators, the overall office leasing industry experienced negative growth in the first half of 2016. However, despite the negative business sentiment, some foreign insurance firms were able to commit to larger office space for expansion. In the first half of 2016, rental prices in the overall office market and the Grade A office market dropped by 20.3 percent and 14.5 percent, respectively, year over year.

 

In the first half of 2016, capital prices for the overall office market and Grade A office market fell by 25.1 percent and 24.4 percent, respectively, on a year-over-year basis. As of the end of June 2016, the total office vacancy rate had risen to about 8%, while office supply had remained poor. The overall office market and Grade A office market investment yields all increased to 2.7 percent and 2.6 percent, respectively.

 

"We expect some gaming operators to relocate their operations from existing offices to the new projects as many major gaming facilities are completed in 2H16. This may result in an increase in the number of vacant offices. Currently, the market is in favor of landlords, and they have more bargaining power. Some businesses may consider upgrading their workspace by committing to a larger space at a lower rental rate "Alison Yip, Associate Director, Capital Markets at JLL Macau, expressed her thoughts.

 

Macau's Retail Industry

 

According to DSEC data, overall retail sales in 1Q16 dropped by 11.2 percent y-o-y to MOP 14.73 billion. Motor vehicles and motorcycles saw the greatest decline. Retail sales of leather goods, watches, clocks, and jewelry dropped by 6.2 percent and 18.3 percent year over year in 1Q16, respectively, while cosmetics rose by 8.4 percent.

 

Retailers specializing in high-end pieces were the hardest hit. Some landlords were more accommodating in rental negotiations and were able to provide tenants with a significant rental discount. Meanwhile, the leasing industry was dominated by cosmetics and sportswear retailers. In the first half of 2016, total retail rental dropped by 18.6%, but there was one notable retail leasing transaction: a multinational fashion company leased a standalone property in Largo do Senado for HKD 1.3 million per month.

 

In the first half of 2016, there were two notable sales transactions. A G/F shop unit in Avenida do Infante D. Henrique was sold for HKD 350 million, while a standalone commercial property in Largo do Senado was sold for HKD 300 million, according to Bossini. Shun Tak Holdings sold a 50% stake in the shopping centre in Nova City Phase 5 in Taipa to a wholly owned subsidiary of ADIA for HKD 3.15 billion during the same time. For the implementation of this project, the two parties will form a joint venture. The total retail capital prices in 1H16 fell by 23.6 percent y-o-y, according to the JLL Macau Retail Index.

 

Despite the retail property sector's slump, Melco Crown Entertainment partnered with DFS Group to extend and upgrade the City of Dream's retail section. The entire retail precinct in City of Dream will be tripled in size once the upgrading project is completed. Phase One, which includes several distinct shopping zones such as beauty and fragrances, apparel and accessories, a shoe salon, and a men's fashion and grooming zone, began in June. The expanded beauty and fragrances zone, which will cover an area of 23,000 sq ft, will become the group's largest beauty hall in Southern China. After the completion of other major facilities such as Wynn Palace and Parisian Macao in 2H16, Macau's retail landscape is expected to become more sophisticated and extensive.

 

"With Macau's the availability of five-star hotel guest rooms, as well as the city's advantage in guest room sizes, room rates, and amenities, it'll be interesting to see if the current trend of tourists staying in Hong Kong hotels and using it as a base to visit Macau reverses in the future. The new supply of hotel guest rooms could help Macau draw more tourists and sustain its tourism competitiveness. Previously, the overall retail market depended heavily on tourist consumption. Local demand, on the other hand, now accounts for 63.5 percent of Macau's overall retail sales. Some gaming operators and developers have already shifted their strategies and begun to look at developing retail projects aimed at local residents and families visiting Macau, with the goal of providing a more diverse shopping experience to consumers "JLL Macau's Associate Director of Retail, Oliver Tong, commented.