Office rents dip after five years

Business | Kevin Xu 11 Jul 2019

Hong Kong's office rents in the second quarter fell by 0.4 percent quarter-on-quarter to HK$76.7 per square feet, the first time it dropped in the last five years, according to real estate services firm Cushman & Wakefield.

Total Grade A office footprint of mainland firms in Hong Kong saw an increase of 2.1 million sq ft for the three years ended March 2019, compared with an increase of 1.2 million sq ft between 2013 to 2016, but the pace of expansion of Chinese firms has slowed since mid-2018 following the escalation of Sino-US trade tension, CBRE Hong Kong said.

Chinese companies now occupy a total of 9.3 million sq ft of space, 12 percent of the grade A office stock.

"Chinese enterprises have played a crucial role in driving Grade A office demand in Hong Kong since earlier in the decade," said Marcos Chan, head of research, the Greater Bay Area and Hong Kong, CBRE. "While ongoing uncertainties behind the US-China trade conflict will translate into slower leasing momentum from Chinese enterprises in the short-term future, underlying demand from these firms remain in place and will continue to benefit the Hong Kong office market in the long-run."

Chan also pointed out that many office occupiers are seeking "decentralization opportunities" because of high rents and for improved connectivity between the central business district and eastern areas of the city.

Over the past three years, occupiers decentralized a total of 1.3 million sq ft of office space, CBRE Hong Kong said.

It predicts a total of five million sq ft of new Grade A space is scheduled for completion in 2022.

The total occupied space in Hong Kong's Grade A office market increased by 4.3 million sq ft to 75.7 million sq ft from March 2016 to March 2019, while the same period saw 5.8 million sq ft of new supply. City-wide vacancy edged up to 5.2 percent as of March 2019, up from 3.9 percent three years ago.

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