Hong Kong Office Leasing Accelerates in October as Rents Dip, Vacancy Still Climbs

Leasing activity in Hong Kong’s Grade A office market intensified in October as tenants took up 479,000 square feet (44,501 square metres) more than they gave back during the month, accelerating from a net take-up of 157,000 square feet in September, according to JLL.

New project completions, including Swire Properties’ Two Taikoo Place in Quarry Bay and Billion Development’s 1 Sha Tsui Road in Tsuen Wan, helped drive leasing volume last month, the property consultancy said in its latest Market Monitor report.

The completions also contributed to raising the city’s vacancy rate to 11 percent at the end of October from 10.5 percent a month earlier, according to the report, which was prepared by senior director of research Cathie Chung and senior analyst Cici Pang.

Vacancy in the prime Central district edged up to 8.4 percent from 8.3 percent in September, while the share of empty space in Kowloon commercial hub Tsim Sha Tsui eased to 11 percent from 11.2 percent. Kowloon East again recorded the highest vacancy rate with 16.7 percent.

Rents Dip Further

Average monthly office rent in October fell by a further 0.6 percent from the previous month to HK$55.90 (now $7.15) per square foot, narrowing from September’s 1 percent dip, JLL said.

In Hong Kong’s key office submarkets, rents in Central registered the largest drop of 0.6 percent last month, while Wan Chai/Causeway Bay and Tsim Sha Tsui saw smaller respective declines of 0.2 and 0.1 percent.

October’s standout leasing transaction was BOC Group Life Assurance renting 23,400 square feet of gross floor area at The Gateway Tower 5 in Tsim Sha Tsui, with the Bank of China affiliate relocating and upgrading from the World Finance Centre within Wharf Holdings’ Harbour City portfolio.

“Tenants continued to look for upgrades in office space, especially in the financial sector,” the report said.

Capital Market Hush

Hong Kong’s property investment market fell silent in October after the apparently aborted sale of the Goldin Financial Global Centre in Kowloon East and the HK$3.07 billion acquisition of a 51 percent stake in a New World Development office project in Cheung Sha Wan by US-based Ares Management during the previous month.

In the absence of headline-making deals, JLL highlighted the marketing by receivers of the China Evergrande Centre in Wan Chai, valued at around HK$9 billion, in a tender that closed on 31 October.

“Upon successful disposal, the sale will be one of several notable en-bloc office transactions over the years,” the agency said.