New lettings in Central fall 55% in June

(21 July 2016, Hong Kong) The tight vacancy environment continued to curb leasing activity with the total number of new lettings in Central dropping by 55% m-o-m in June, according to JLL’s Hong Kong Property Market Monitor report released today.

Vacancy in the Central Grade A office market increased from 1.3% in May to 1.4% in June but was still the lowest among the main business districts. With vacancy remaining tight, Grade A office rents in Central edged up by 0.6% m-o-m to HKD107.4 per sq ft, their highest level since the Global Financial Crisis in 2008.

In Kowloon East, the impact of Manulife’s lease expiry at Manulife Financial Centre in Kwun Tong was offset by the solid interest in the property, which allowed the bulk of the space being back-filled ahead of lease expiry, as well as Avnet Technology’s relocation to a 67,800-sq-ft space at Enterprise Square 5 in Kowloon Bay. Rents in Kowloon East remained broadly stable as increasing supply side competition restricted the ability of landlords to push rents higher.

Paul Yien, Regional Director and Head of Landlord Representation at JLL in Hong Kong, said: “The vacancy rate remaining at below 3% across business districts in Hong Kong Island. We found that more tenants in Wan Chai/Causeway Bay and Quarry Bay began to seek office space in non-core business districts such as Wong Chuk Hang as the transportation would be improved after South Island Line (East) opened at the end of this year. There will be a number of good quality office buildings completed in future, which will provide various choices to tenants. 41 Heung Yip Road will be one of the new Grade A office buildings in the district. And it is the only Grade A office building with a floor plate of 11,000 sq ft to be launched  in Hong Kong Island this year,”

Denis Ma, Head of Research at JLL in Hong Kong, said: “Demand from mainland Chinese corporates, which has been a pillar of support for the local office market over the past two years, is starting to show signs of slowing. Given that mainland Chinese demand has been the prime reason behind the recovery of the Central office market, this is a situation that should be monitored closely”.

Source: Research, JLL