Hong Kong's Central District Office Demand Softens
According to JLL's latest Hong Kong Property Market Monitor, rents in the overall Grade A office market continued to rise albeit at a slower pace last month. Average rent of Grade A office climbed 0.5% m-o-m in October, compared to a 1.0% m-o-m growth in September 2018.
Leasing demand in Central continues to show signs of easing with the amount of surrender space in October has climbed to 337,000 sq. ft. The companies decided to surrender are mainly because of the relocation needs. Nonetheless, banking and financial services firms remained active in the market. China Merchants Bank will relocate to Three Exchange Square after leasing five floors (59,4000 sq. ft) to accommodate expansion plans. The space was previously leased by HNA.
Alex Barnes, Head of Markets at JLL says, "Net absorption in the overall Grade A office market amounted to 188,100 sq. ft in October, bolstered by tenant movement to decentralized areas, especially to Hong Kong East and Wong Chuk Hang. The Kowloon East office market also benefited from the trend with rents growing a market leading 1.0% m-o-m in October. The stronger growth was supported by a 1.3% m-o-m increase in Grade A1 offices as more decentralizing tenants targeted higher quality office buildings."
Denis Ma, Head of Research at JLL also commented, "Investment volume remained subdued against the backdrop of falling stock market and escalating uncertainties brought about by the trade war. Still, a number of smaller Grade A office units transacted at extremely high prices. A 2,930-sq-ft unit on the 30/F of 9 Queen's Road Central reportedly being sold for HKD 163.5 million or HKD 55,800 per sq. ft, amongst the highest ever transacted in the building."