Hong Kong Grade A office space drops 40 pct in December, says JLL
The holiday season and limited tenant options led to new letting in Grade A office space dropping by about 40% m-o-m in December last year, according to JLL’s research report of “Hong Kong Property Market Monitor“.
With availability in the city’s traditional core business areas standing at just 1.6%, about half of all new lettings were realised in non-core business areas such as Kwun Tong and Tsuen Wan. The vacancy rate in the overall market remained largely unchanged from the previous month to end the year at 2.9%, while the vacancy rate in Central was also unchanged, ending the year at just 1.2%.
In Central, a net withdrawal of 7,100 sq ft was recorded as several leases expiries returned vacated space to the market. Demand for office space was largely underpinned by smaller requirements. The most notable transaction involved Standard Bank leasing 9,800 sq ft at Two Pacific Place in Admiralty for expansion and consolidation purposes.
Led by increases at the top-end of the market, rents in Central’s Grade A office market edged up by 0.8% m-o-m in December, lifting full-year growth to 13.3%. This was the largest rental increase in a year since 2010. All other office submarkets also recorded marginal growth against a tight vacancy environment.
Alex Barnes, Head of Hong Kong Markets at JLL, said: “On the back of low vacancy and positive rental reversions, a growing number of business users are looking at options outside of Central. Causeway Bay, Hong Kong East and increasingly Wong Chuk Hang in Island South, are attracting business users from more expensive office districts. Ahead of the MTR South Island Line (East) completing, we have seen a pick-up in leasing activity from occupiers that have traditionally been located in core locations on Hong Kong Island.”
Denis Ma, Head of Research at JLL Hong Kong, said: “After several years of muddling growth, the Central office market was back with a vengeance posting its strongest year of growth in 5 years. Although increased volatility in global financial markets has dampened market sentiment more recently, we still expect rents in Central to grow a further 5-10% in 2016 on the back of sustained demand PRC corporates and a tight vacancy environment.”