Rents for Two International Finance Centre, one of the world's most expensive super Grade A buildings, in Central is still 14 percent lower than three years ago.
An example of that is reinsurance company China Re Asset Management's move into units two to five on the 41st floor.
It is reportedly paying a monthly rent of HK$1.01 million, or HK$150 per square foot, way down from the HK$175 that Funde Asset Management (Hong Kong) was previously shelling out for its three-year lease.
The move fits in with China Re's upgrading and expansion plan: the new office space is 6,740 sq ft, much more spacious than its old location's approximately 5,000 sq ft.
And it seems to think it has a good deal as it has entered into a six-year lease agreement from December to November 2029.
Ernest Tse, senior regional operating director in Centaline's commercial office department, says the long lease shows the company's confidence in this city.
Given Central's status as a traditional core commercial area, it continues to be favored by both domestic and foreign companies.
With the completion of Cheung Kong Center II, a new super Grade A building, it is anticipated that Central will remain the primary focus for Hong Kong as a commercial center in the future.
However, the new projects will push up the overall office vacancy rate.
Tse predicts office rents will remain stable throughout the year.
The SAR administration has been consistently releasing commercial land in Central for the past several years.
Including nearby upcoming commercial areas and the new super Grade A buildings to be completed, Central is expected to see around 3.06 million sq ft of new commercial floor space.
The New Central Harbourfront site three project in Central, owned by Henderson Land Development (0012), has two phases that are expected to be completed in the fourth quarter of 2026 and the fourth quarter of 2032, according to the latest mid-term report from the developer.
Henderson secured the site, Hong Kong's "land of kings"in 2021 with a record bid of HK$50.8 billion for the project, which comprises three buildings for offices, commercial use and retail development.
The city's rental level for Grade A commercial buildings dropped to HK$52.90 per sq ft in the fourth quarter, making for an annual decrease of 6.5 percent.
The expected increase for this year is less than 10 percent, according to property consultancy Colliers.
Rental rates in the core business districts of Central and Admiralty have significantly decreased to HK$93.10 per sq ft, down 8.2 percent compared to 2022 levels.
Due to a significant increase in supply in the previous quarter, net absorption was a negative 976,000 sq ft, which means more office space was vacated or returned than leased or purchased.
As a result, the vacancy rate hit a record high of 15.9 percent, with the quarterly increase being 1 percent, said Colliers.
The realtor says rents for Grade A buildings are expected to decrease by a minimum of 2 percent this year, with demand primarily driven by the technology, media and telecommunications as well as the insurance sectors.
With the return of the tourist influx, overall rents for prime street-level retail spaces rose 7.5 percent last year. The rental increase for this year is expected to be within 10 percent.
Due to lower-than-expected economic growth and an increase in interest rates, businesses are prioritizing cost-savings over expanding operations.
