Central Rents Down 2.4% in February as Hong Kong Office Tenants Give Back More Space

Office rents in Hong Kong’s prime Central district fell 2.4 percent in February from month-earlier levels as tenants citywide gave back more Grade A space than they took up, according to JLL.

The overall market recorded a negative net absorption of 14,600 square feet (1,356 square metres), reversing January’s positive net absorption of 160,800 square feet, the consultancy said in its Hong Kong Property Market Monitor report. The January figure had benefited from the realisation of pre-committed space at The Henderson, as the office tower on Murray Road in Central completed construction during the month.

Overall net effective rents dipped 1.4 percent from January levels to average HK$51 ($6.52) per square foot per month. Among other key submarkets, rents in Hong Kong East eased 0.6 percent while those in Kowloon commercial hub Tsim Sha Tsui remained flat.

The overall vacancy rate was unchanged at 12.9 percent at the end of February. Central and Wan Chai/Causeway Bay’s vacancies rose marginally, by 0.1 and 0.2 percentage points, while unused space in Hong Kong East declined by 0.6 percentage points, according to the report prepared by senior director of research Cathie Chung and senior analyst Cici Pang.

LVMH Expansion

Among new lettings, French luxury goods giant LVMH took up two floors totalling 47,200 square feet at Swire Properties’ Two Taikoo Place in Quarry Bay, expanding from nearby Dorset House, JLL said without reporting the rental rate.

The 42-storey Two Taikoo Place was completed in September 2022 and boasts multinational tenants including Swiss private bank Julius Baer, which leases four floors, and China CITIC Bank’s local unit, which occupies six floors.

Other February transactions included the Hong Kong University of Science and Technology taking up 39,500 square feet in a high floor at Sun Hung Kai Properties’ Millennity Tower 1, as well as Swiss drugmaker Novartis leasing 10,500 square feet in a high floor at 1111 King’s Road, formerly known as Cityplaza One, a 1997-vintage building developed by Swire and owned by a Gaw Capital Partners fund.

HKUST is paying roughly HK$29 per square foot per month at the tower in Kwun Tong, while Novartis is shelling out around HK$35 for its Quarry Bay space.

In the capital market, a mid-low zone floor at The Sun’s Group Centre in Wan Chai was sold by a local investor for HK$105 million (HK$14,200 per square foot of gross floor area), resulting in a 33 percent loss from the 2017 purchase price of HK$157.4 million, JLL said.

Weak Sentiment Prevails

The Asian financial hub’s office leasing market was mostly stagnant in February due to weak sentiment and the Chinese New Year holiday, Knight Frank said in its Hong Kong Monthly Report.

The average Grade A office rent in Hong Kong Island fell 1.6 percent from January and 7.6 percent year-on-year to HK$63 per square foot per month. Leasing activity in North Point and Causeway Bay was particularly quiet, according to the property services firm.

In Kowloon, the average monthly rent in February was HK$23.80 per square foot, with leasing transactions averaging 4,800 square feet as small to mid-sized deals dominated the market.

“Some leasing interest was drawn to new developments in the Kowloon market, thus further dampening leasing momentum on Hong Kong Island,” Knight Frank said.