Hong Kong Class A Office Rents Continue Upward Trend in 2018
According to the latest Property Market Monitor released by JLL, Grade A office rents in Hong Kong advanced by 0.7% m-o-m in August, with Wanchai/Causeway Bay posting the strongest growth on the back of robust demand, up 1.0% month-over-month.
In Central Hong Kong, office rents in Grade A1 offices grew by 1.6% m-o-m, underpinned by a tight vacancy environment, while overall, rents in Central grew by 0.9% m-o-m. Rents were able to climb higher despite new lettings in Central registering a m-o-m drop of 51%. Still, finance-related firms remained active and sought to expand in the traditional CBD. In one of the most notable transactions, BitMEX, a cryptocurrency trading platform, reportedly leased the whole of the 45th floor at Cheung Kong Center for a monthly rent of HK$225 per sq. ft, setting a new record high for the building.
In Wong Chuk Hang, the completion of South Island Place saw the addition of a further 307,200 sq. ft. of Grade A office space being added to the market in August. However, the realization of pre-commitments in the building was offset by returning space in Kowloon East, resulting in a net take-up amounting to a mere 28,300 sq. ft. in the overall market for the month. With about 452,000 sq. ft. to be vacated upon lease expiry in Kowloon East over the next 12 months, it is likely that net take-up in the overall market will continue to be weighed down over the short term.
Alex Barnes, Head of Markets at JLL said, "Despite an escalating US-China trade dispute, the market remains robust due to supply and demand fundamentals. While Grade A office rents moved higher in most submarkets during the month, the wave of new office supply coupled with elevated levels of vacancy in Kowloon East are expected to dampen growth in the district in the months to come. Nonetheless, the rise in supply in Kowloon East should will likely provide an opportunity for tenants seeking to decentralize."
Denis Ma, Head of Research at JLL also added, "The government's recent housing initiatives and the escalating trade hostilities between the US and China contributed to home sales sliding 21% m-o-m in August and to and five-month low. Still, the primary sales market continues to hold up well as developers adopt less aggressive pricing strategies, which is drawing buyers to the market."