Commercial space surplus forecast

A surplus of commercial buildings could occur in the next two years and the rental incomes may be suppressed, a report from Savills shows.

Although the rental drop softened in the first quarter, the scale of enterprises has shrunk.

The overall Grade A office rents fell by 3.5 percent on a quarterly basis in the first three months, dropping for seven consecutive quarters. In the fourth quarter last year, rents fell by 5.1 percent.

Hong Kong Island rents fell by 4 percent, while Kowloon rents fell by 2.8 percent.

The office vacancy rate increased to 8.9 percent. The vacancy rate of Central offices hit a 15-year high, rising from 7.3 percent to 7.6 percent.

Savills expects the overall vacancy rate to reach 10 percent.