Central office vacancy rate drops to its lowest level in over six years

At least 20% of newly leased office space taken by PRC firms

HONG KONG, 26 May 2015 – The Grade A office vacancy rate in Central declined to 2.5%–the lowest monthly level since the onset of the Global Financial Crisis in November 2008–at the end of April, primarily driven by robust leasing demand, according to JLL’s Hong Kong Property Market Monitor report issued in May.

Net take-up in Central and Tsimshatsui amounted to 167,700 and 30,300 square feet, respectively, boosting growth in the overall Grade A office market to 224,600 square feet. Led by demand from banks within the region, the vacancy rate in Tsimshatsui edged down from 0.9% in March to 0.6% (its lowest level in more than a decade) in April. Bank of Communications and Industrial Bank of Taiwan, for instance, leased 13,700 square feet (gross) and 12,100 square feet (gross), respectively, at The Gateway Tower 6. However, net take-up in Wanchai/Causeway Bay and Hong Kong East contracted slightly owing to lease expiries. Vacancy in both submarkets, however, remained tight.

Ben Dickinson, Head of Markets at JLL, Hong Kong, said: “Increasing demand from the banking and finance contributed to the vacancy rate in Central declining to its lowest level in more than six years. PRC firms continued to be an important source of demand with at least 20% of all floor space leased in Central in April taken by these firms.”

“With availability in Central tightening and rents rising, more companies will start to consider relocating to other business districts such as Causeway Bay and Quarry Bay,” Ben added.

In the property investment market, there were fewer en-bloc transactions recorded in April. Investment volumes fell by 82% m-o-m to HK$446.7 million, the lowest level in two years. Investors continued to show interest in non-Grade A office buildings, which accounted for about 40% of all transaction volumes. Grade A Office Vacancy Rates