Hong Kong office rents drop 1.3% in September

Rental decline slowed down compared to the first half of the year.

Overall net absorption amounted to -243,500 sq ft as a significant amount of space in Central returned to the market from tenants moving out of the traditional CBD (decentralisation). Notwithstanding, JLL says limited demand was underpinned by a few flexible space operators taking space to open new centres in Causeway Bay.

For instance, Compass Offices reportedly leased 15,700 sq ft (LFA) at Lee Garden Two, while Sky Business Centre leased 17,000 sq ft (GFA) at Times Square.

Here’s more from JLL:

The vacancy rate in Central rose to 6.8%. The Securities and Futures Commission space came back to the leasing market after the organisation relocated to Hong Kong East. New lettings remained subdued, although the number of transactions increased slightly, given that a few tenants relocated within the precinct. Among the more notable transactions, Sullivan and Cromwell leased 14,000 sq ft (NFA) at Alexandra House to relocate out of another Grade A building in Central.

Rents continued to contract across all major office submarkets in Hong Kong as the overall market recorded a 1.3% m-o-m drop in September. Rental decline slowed down compared to the first half of the year as uncertainties surrounding COVID-19 appear to be more contained. Rental pressure was more pronounced in the traditional core office submarkets on Hong Kong Island, where rents dropped more than 1.5% m-o-m as demand stayed weak.

Sales activity stayed relatively slow in September with just a handful of strata titled office floors above HKD 20 million being transacted. There were reports and company announcements around the sale of the Goldin Global Financial Centre in Kowloon Bay. However, the transaction appears to be under dispute and far from completed.