Rents rocket for premium offices

Overseas Education | Jasper Ng 12 Oct 2017

Hong kong's grade A office rental market is red-hot, with rents in tier-one commercial buildings in the central business district rising up to 17 percent on a year- on-year basis.

Among them, premium office space in Central and Admiralty has contributed largely to the increasing trend due to the huge demand driven by mainland-based companies.

In the core district, both the number of leasing transactions and rent levels have surpassed those at the corresponding time last year. For instance, a 4,000-square-foot office unit in the Far East Finance Centre in Admiralty was leased out in August, with its rent per square foot per month jumping 13.6 percent to HK$100 from HK$88 last year, according to Midland Commercial.

Meanwhile, office rents at the landmark International Finance Centre even hit HK$200 psf monthly.

Midland sales director Alan Law Chung-ying said the rental market of Grade A buildings in Central and Admiralty has come under the spotlight.

"The highest rent per square foot of a project located at 9 Queen's Road Central climbed 21.4 percent to HK$85 from HK$70 in 2016," he said.

Figures show other Grade A buildings on Hong Kong Island have also recorded significant rent increases this year - especially those in Central - except for World-Wide House.

"Around 70 percent of commercial units in Wan Chai are being leased by Chinese companies, while they also rent about 50 and 30 percent of units in the Shun Tak Centre and Far East Finance Centre, respectively," Law said.

"Major tenants of those benchmark Grade A offices include financial and investment firms, large-scaled law firms, and accounting firms."

However, temporarily bucking the trend was the Shun Tak Centre in Sheung Wan - one of the benchmark Grade A commercial buildings - which recorded a short-term fluctuation in rents of some units in August. For example, the rent for seaview unit 1411 situated in the west wing once fell below HK$60 psf.

"A certain number of units in the west wing of the Shun Tak Centre had been leased previously. Therefore, some owners cut rents so as to attract more tenants," Law explained.

He said rents at 9 Queen's Road Central are being bolstered by a low supply of premium space, signifying that market demand for Grade A offices in the core district remains strong.

During the first eight months of 2017, five benchmark Grade A offices recorded historical-high rent levels, namely Bank of America Tower, Far East Finance Centre, Fairmont House, Shun Tak Centre, and COSCO Tower, Midland Commercial said.

Property consultant JLL reported that the overall vacancy level of Grade A office space was 5.1 percent as at August 17.

It added that mainland firms' demand for Central Grade A offices slowed to account for 45 percent of all new lettings, as tenants adopted a wait- and-see attitude ahead of China's 19th National Congress opening on Wednesday.

Nevertheless, Hong Kong remained the world's most expensive city in which to rent prime office space for the fourth year running, in the latter half of 2017, at US$304 (HK$2,371) psf per annum - up 9 percent from 2016, according to the latest report by Knight Frank.

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