Strong Leasing Activity Drives Up Office Rents Across Hong Kong
According to JLL's latest Property Market Monitor
report, strong leasing momentum driven by tenant decentralization and sustained expansionary requirements from PRC occupiers has pushed rents up in the office market as a whole.
Hong Kong East continued to lead the way with rents growing 0.6% m-o-m on the back of strong pre-leasing at One Taikoo Place in Quarry Bay. Strong interest has been shown from large occupiers, among which EY was reported to have pre-leased about 146,300 sq. ft. at the development. In Wanchai/Causeway Bay, rents advanced by 0.3% m-o-m as the vacancy rate dropped to 2.1%, its lowest level in almost two years.
In Central, requirements from PRC banking and financial institutions remained the main drivers of rising leasing demand, accounting for 76% of new lettings in the submarket during the month. Notable new lettings included those from Huaxia Bank, which reportedly leased 14,000 sq. ft. at Two IFC to accommodate expansion plans, and Ping An Securities, which expanded out of its Sheung Wan offices to lease a whole floor of approximately 14,300 sq. ft. at CITIC Tower in Admiralty.
Net absorption amounted to 376,700 sq. ft. with rents in the overall market rising a further 0.2% m-o-m in March.
Alex Barnes, Head of Markets at JLL, says: "Rents in Central are poised to surge ahead as Mainland Chinese companies show no signs of slowing their expansion and there are some large requirements active in a tight vacancy market. Not surprisingly, Central's high rents and tight supply will accelerate the relocation of large occupiers to consider emerging core office districts, allowing room for landlords in these areas to raise rents. Vacancy rates of Grade A offices are expected to tighten further and push rents higher in 2018, and beyond."
Denis Ma, Head of Research at JLL, adds: "While prime office rents look set to head north, the retail market also maintained its strong run in 2018 with key demand drivers recording substantial double-digit growth in January-February. Retail rents are on the verge of recovery given visible improvements in the inbound tourism market and retail sales. We expect this momentum to carry through to the leasing market over the coming months."