Office vacancy in Hong Kong’s Central district edged up to 7.5 percent in April from 7.3 percent a month earlier as overall rents in the city drifted lower, according to a report released recently by JLL.
An overall net withdrawal of 99,400 square feet (9,235 square metres) was recorded in the Grade A office market in April, barely narrowing from March’s net withdrawal of 100,500 square feet, the global property consultancy said in its Hong Kong Property Market Monitor.
Average monthly rent in the city fell to HK$57.10 ($7.36) per square foot in April from HK$57.70 the month before, a 1 percent drop.
“With many tenants still in cost-saving mode, the corporate downsizing trend continued in April,” said Alex Barnes, head of office leasing advisory at JLL in Hong Kong. “Occupiers have begun to reconfigure their post-pandemic real estate requirements, leading to rising demand for quality office buildings. We believe flight to building quality will remain a consistent market theme moving forward.”
In Central, what little leasing activity occurred in April mainly involved tenants moving from one space to another within the district. A notable example was China Life Franklin Asset Management’s leasing of a floor (13,900 square feet) at One Exchange Square, relocating from Cheung Kong Center.
While office vacancy in Central ticked up in April, other submarkets saw bigger swings. Wan Chai/Causeway Bay’s rate jumped from 9 percent in March to 9.6 percent, while Kowloon East’s eased to 13.6 percent from 14.3 percent. Hong Kong East continued to have the lowest vacancy rate at 6.6 percent, up from 6.3 percent in March.
Among the key office submarkets, Tsim Sha Tsui experienced the biggest rental decline, while rents in Hong Kong East were relatively stable.
JLL also noted a conspicuous investment transaction: the American Chamber of Commerce’s purchase of a high-level floor at Hong Kong Diamond Exchange Building in Central for HK$85.88 million (HK$31,229 per square foot). By comparison, the chamber last October had unloaded a unit at Bank of America Tower for a considerable discount at HK$145 million (HK$24,296 per square foot).
In its own monthly office report for Hong Kong, property services firm Knight Frank said leasing sentiment in Kowloon remained strong in April, with activity concentrated in Kowloon East. The agency pointed to sustained leasing demand amid a continuous downtrend in rents in Kowloon, as tenants took advantage of expansion opportunities with attractive terms.
Electronics firm Commscope expanded its floor space from 7,000 square feet to 13,500 square feet at Millennium City 1 in Kwun Tong. Further west, investment company Up Way China Bullion doubled its office space by renting an additional 10,000 square feet at Nina Tower in Tsuen Wan, New Territories.
Back on Hong Kong Island, Island East remained attractive during April as multinationals sought large office spaces, Knight Frank said.
Julius Baer, a Swiss wealth management group, leased 91,800 square feet at Two Taikoo Place in Quarry Bay. Knight Frank expects Island East to continue benefiting from the decentralisation trend and to maintain a stable vacancy rate and rental level for the rest of the year.
The agency’s analysis found that office vacancy in Central remained steady at 7.9 percent in April, while rates in Wan Chai and Causeway Bay rose to 12.4 percent and 7.5 percent respectively.