Nan Fung Group’s Airside complex in Kai Tak chalked up some big leases in March
Tenants in Hong Kong’s Grade A office market took up 137,000 square feet (12,728 square metres) more than they gave back in March, with leasing demand driven by occupiers realising pre-commitments at newly completed projects, according to JLL.
The citywide vacancy rate reached 13.1 percent at the end of March, up 0.2 points from a month earlier, due in part to the completions of Swire Properties’ Six Pacific Place in Wan Chai and Viva Properties’ Viva Place in Wong Chuk Hang, the consultancy said in its Hong Kong Property Market Monitor report. Vacancy in the prime Central district inched up 0.1 points to 10.6 percent.
Some 38 percent of new lettings in the first quarter of 2024 were in excess of 20,000 square feet, up from 22 percent in the year-ago period, said Alex Barnes, managing director and head of office leasing advisory at JLL Hong Kong. Leasing volume of transactions between 20,000 and 50,000 square feet rose by just under 5 percent during the first three months of the year.
“Insurance companies, financial institutions and luxury brands are the most active occupiers in the office leasing market,” Barnes said in a release. “We expect larger new lettings to continue in the second quarter of 2024.”
Rent Skid Continues
Overall net effective rent in March fell a further 0.7 percent from month-earlier levels to HK$50.60 ($6.47) per square foot per month, following February’s 2.4 percent drop.
Alex Barnes, managing director and head of office leasing advisory at JLL Hong Kong
Among key office submarkets, rents in Central and Hong Kong East fell 1.3 percent and 0.6 percent, respectively, while rates in Wan Chai/Causeway Bay and Kowloon East rose a marginal 0.1 percent, said senior director of research Cathie Chung.
New lettings tracked by JLL were led by Prudential Plc, which took up an entire 53,600 square foot floor at Nan Fung Group’s Airside complex in Kai Tak as part of an expansion of the insurance giant’s local workforce.
In the capital market, Goldman Sachs and Kailong Group sold 88WL, a newly developed commercial building near the Macau ferry terminal, to the Cheung family behind Kingboard Holdings and Kingboard Laminates for HK$700 million ($89.4 million).
The consideration for the 25-storey office and retail block was about $33 million less than the US investment bank and the Hong Kong private equity firm paid to acquire the site seven years ago.
Calling the Bottom
March leasing demand on Hong Kong Island was propelled by mainland companies, Knight Frank said in its monthly report. Examples included Golden MediTech, which moved from the Bank of China Tower to lease 6,000 square feet at The Henderson, where Brilliance China Automotive Holdings also took up 6,300 square feet.
The Kowloon market saw a significant rebound in March as new leasing transactions doubled compared with those in February, when many companies had halted business activity during Chinese New Year, according to the property services firm.
New lettings tracked by Knight Frank were led by the Hong Kong Monetary Authority, which relocated from Swire’s Pacific Place to 110,000 square feet of space at Sun Hung Kai Properties’ International Commerce Centre. In another Island-to-Kowloon shift, Singapore-based bank OCBC relocated from 161 Queen’s Road Central to Airside, leasing 73,000 square feet.
“The outlook for 2024 remains challenging, as weak economic sentiment and conservative plans for business expansion continue to sap leasing demand,” Knight Frank said. “Nonetheless, we are cautiously optimistic about the market this year, as we believe it has already bottomed.”
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