(21 September 2016, Hong Kong) Requirements among insurers and government departments in decentralised locations contributed to positive net take-up in the Grade A office market in August, ending three consecutive months of net withdrawals, according to JLL’s Hong Kong Property Market Monitor report released today.
Net take-up in the overall office market amounted to 30,900 sq ft in August.
In Central, tenant options remained limited with close to 95% of all buildings carrying a vacancy rate of less than 5%. As a result, rentals continued to edge higher, up 1.1% m-o-m to HKD 108.7 per sq ft, despite a 20% m-o-m drop in gross leasing volume.
In contrast, rents in Kowloon remained under pressure, down marginally by 0.3% m-o-m in Tsim Sha Tsui, against high vacancy in a handful of buildings and mounting competition from Kowloon East.
As of end-August, Grade A office vacancy was lowest in Central (1.5%) while contracting slightly to 2.3% and 7.3% in Tsim Sha Tsui and Kowloon East, respectively.
Alex Barnes, Head of Hong Kong Markets at JLL, said: “We expect rents in Central and Hong Kong East to grow further into early 2017. The stock connect cross-border trading schemes are seen as one of a few catalysts for China’s companies entering Hong Kong. The pressure on vacancy and rents in the top end of the Central market will continue to support relocation to nearby lower cost districts, although this is unlikely to significantly impact vacancy in the short term.”
Denis Ma, Head of Research at JLL, said: “Despite moderate improvements in a number of key economic indicators, demand for office space is likely to remain thin through the remainder of the year. The stabilisation of China’s economy and scheduled launch of the Shenzhen-Hong Kong Stock Connect will help lift PRC demand, which had been flagging in recent months, though it is unlikely to return to levels seen following the initial Stock Connect launch. Still, along with the tight vacancy environment, it should be enough to keep rents ticking higher in Central through the remainder of the year.”
| Grade A Office Vacancy Rates | ||||||
| Period | Overall | Central | Wanchai /Causeway Bay | Hong Kong East | Tsimshatsui | Kowloon East |
| End-August | 4.1% | 1.5% | 2.4% | 2.0% | 2.3% | 7.3% |
| End-July | 4.2% | 1.5% | 2.2% | 2.0% | 2.4% | 7.4% |
Source: Research, JLL