Hong Kong Office Market Shrank Again in January as Reopening Fails to Ignite Demand

Hong Kong’s Grade A office market in January saw tenants give back 16,900 square feet (1,570 square metres) more than they took up as leasing activity paused during Chinese New Year, according to JLL.

Optimism sparked by the reopening of the mainland border after years of COVID curbs did little to encourage businesses to sign new office leases as the city’s overall vacancy rate crept up to 12.2 percent last month from 12.1 percent in December, the property consultancy said in its latest Market Monitor report.

“Reopening induced optimism, but activities remain subdued,” JLL researchers led by executive director Nelson Wong said in the report, linking the slowdown to the holiday season.

The January contraction in the office market came after net take-up of Grade A office space in Hong Kong reached 176,000 square feet in 2022 to record the first full-year of growth since 2019, according to an earlier report by Cushman & Wakefield.

Rent Slide Continues

The vacancy rate in the prime Central district edged up to 8.9 percent from 8.8 percent in December, and the share of empty space in the Wan Chai/Causeway Bay area climbed to 10.3 percent from 10.2 percent a month earlier.

Kowloon commercial hub Tsim Sha Tsui’s vacancy rate held steady at 11 percent in January, while Kowloon East continued to see the highest rate among key submarkets with 19.6 percent, up from 19.5 percent.

Average monthly office rent in January fell by 0.2 percent to HK$55.20 (now $7.04) per square foot after a 0.4 percent drop the previous month and a 3.7 percent plunge for the whole of 2022, according to the JLL report.

Rents in Central and Wan Chai/Causeway Bay both fell by 0.2 percent from a month earlier, while Tsim Sha Tsui’s rent remained stable.

Among a handful of new lettings, Nexify leased a single high floor with 12,600 square feet of gross floor area at Sun Hung Kai Properties’ newly completed The Millennity in Kwun Tong.

The local tech company is relocating and upgrading from COS Centre in the same district, JLL said. Nexify will pay about HK$25 per square foot in monthly rent at its new home.

Watch This Space

In the investment market, watch distributor Cortina Holdings acquired three units on a high floor of the NCB Innovation Centre in Cheung Sha Wan for HK$63.3 million, or HK$15,067 per square foot of GFA, in January.

The seller was the building’s developer, New World Development, which had relabelled the former 888 Lai Chi Kok Road after selling a set of three high-level floors along with naming rights to the mainland’s Nanyang Commercial Bank for HK$1.2 billion in 2021.

The investment market got a boost in the waning days of 2022 when PAG and Mapletree acquired Goldin Financial Global Centre in Kowloon Bay for HK$5.6 billion, or HK$6,570 per square foot of GFA, from Goldin Group’s liquidators.

The deal marked the first en bloc sale in Hong Kong’s Grade A office market since June 2021, when Billion Development & Project Management bought the Kowloonbay International Trade and Exhibition Centre from Hopewell Holdings for HK$10 billion.