Hong Kong office market's total surrender space reaches record highs

Total surrender space rose to about 1.77 million sq ft in February.

Overall, Grade A office net absorption was -55,100 sq ft in February, according to JLL. Total surrender space rose to about 1.77 million sq ft, the highest level ever recorded, as corporate occupiers attempted to save rental costs by downsizing in the midst of the current recession.

Furthermore, the Covid-19 pandemic has prompted tenants to reconfigure their real estate requirements and look for flexibility. To meet growing demand, flexible workspace provider IWG, which recently announced a global partnership with Standard Chartered, leased a floor (50,300 sq ft, GFA) at The Quayside in Kwun Tong to open its third Signature centre in Hong Kong.

The vacancy rate in Central stood at 7.5% as of the end of February. There were some tenant movements within the submarket. For instance, financial print service provider REF Financial Press reportedly leased 21,300 sq ft (GFA) at The Center in Sheung Wan.

Rents declined for the 21st consecutive month, dropping by 0.8% m-o-m in February. The rental market remained soft in view of subdued occupier demand. Rents in Tsimshatsui dropped the most among major office submarkets, whereas rents in decentralised office submarkets, namely Hong Kong East and Kowloon East, were stable.

The investment market was relatively less active in February than the previous month, with only a handful of notable sales transactions registered. As one of the more noteworthy transactions, a mid-floor unit at The Center in Sheung Wan was reportedly sold for around HKD 109 million (HKD 34,800 per sq ft).