Commercial rental declines accelerate in second quarter

Hong Kong’s rental declines accelerated in the second quarter in both the office and retail leasing markets, and overall availability of Grade A office space rising to 10.7 percent, the highest level in 15 years, indicating office rents will be under further pressure in the second half of the year, according to Cushman & Wakefield.

John Siu, Cushman & Wakefield's Managing Director, Hong Kong, expects overall availability to reach about 12 percent by the end of 2020, depressing overall grade A rents by another 8 percent in the second half of the year. Greater Central rents are expected to decline by up to 20 percent for the full year.

On the retail side, a more stable retail leasing landscape in Tsim Sha Tsui helped boost the prospects there, which has overtaken Causeway Bay in terms of retail rents for the first time, Cushman & Wakefield said.

Rents in Causeway Bay continued to be heavily impacted by a struggling luxury sector. With the biggest quarterly drop among all submarkets, by 25 percent to HK$969 per sq ft per month, the current level represents a drop of 46 percent year-on-year and of 76 percent from the peak in fourth quarter 2013. The decline also meant that Tsim Sha Tsui, with rents at HK$1,018 per sq ft per month, surpassed Causeway Bay as the most expensive retail district in Hong Kong for the first time.