Hong Kong’s Office Market Shrank By 96,800 Square Feet Last Month

Hong Kong’s Grade A office market shrank by 96,800 square feet (8,993 square metres) in June, doing an about-face after eight straight months of positive take-up, according to JLL.

Overall vacancy in the city edged up to 9.4 percent at the end of June from 9.3 percent in May, the property consultancy said in its Hong Kong Property Market Monitor released Wednesday. Increases were led by Central, with the vacancy rate rising to 7.9 percent from 7.6 percent in the chief business district, and Hong Kong East, whose rate rose to 8.9 percent from 8.6 percent. The vacancy rate in Tsim Sha Tsui, meanwhile, dipped to 10.2 percent from 10.5 percent.

The abrupt turnaround in net take-up came just one month after occupiers in Hong Kong leased 129,000 square feet more than they gave back.

“It is normal to see take-up rate under pressure as the leasing market is disrupted by the pandemic,” said Paul Yien, executive director of office leasing advisory at JLL in Hong Kong. “However, there are companies looking to expand in core business districts with Central’s Grade A office rents dropping 28.3 percent from the market peak in 2019, which is attractive to tenants.”

Steady Rents in June

Overall net effective rents of Grade A office space averaged HK$57.30 (now $7.30) per square foot per month in June, easing 0.1 percent from May’s reading.

Among the major office submarkets, Central’s office rents remained flat during the month while Wan Chai/Causeway Bay registered a relatively larger decline. The magnitude of rental movement in the office submarkets remained small, JLL said.

The agency highlighted Fubon Life Insurance’s take-up of 12,350 square feet in a low floor at 12 Taikoo Wan Road (formerly Cityplaza 4) in Quarry Bay. The lease in the range of HK$40-HK$45 per square foot marked a relocation and expansion within the same building, which was developed by Swire Properties and sold to an investor group led by Gaw Capital in 2018.

Other major office take-ups in June included 23,400 square feet in a low floor at Gateway Tower 5 in Tsim Sha Tsui for HK$30-HK$35 per square foot and 9,300 square feet in a mid-level floor at Central Plaza in Wan Chai for HK$50-HK$55 per square foot.

Aiming High in Wan Chai

Office transactions in June were mainly driven by primary sales activities, JLL said.

Three high-zone floors at Novo Jaffe, an under-construction skyscraper in Wan Chai, were acquired by local firm Golden Resources for self-use at a consideration of HK$159.5 million, or HK$23,700 per square foot of gross floor area.

The 30-storey commercial tower at 218 Jaffe Road is a project of Hong Kong-listed Rykadan Capital, which redeveloped the site after the HK$315 million compulsory sale of the eight-storey Jaffe Mansion in 2018.