Yet retail leasing momentum continued to improve in August
According to JLL's latest Hong Kong Property Market Monitor Report, net absorption in the overall office market continued to decrease to -10,900 sq. feet in August 2021. There were still some corporate downsizing activities due to the pandemic but those were largely offset by the upgrading demand and expansion of the flexible office space sector.
The flexible office sector expanded, following demand for flexible lease lengths and sizes, increasingly considered as essential real estate features by office tenants. For instance, Compass Offices expanded in-house at both Lee Garden One in Causeway Bay (16,200 sq. ft, LFA) and Infinitus Plaza in Sheung Wan (11,900 sq. ft, GFA), while Regus leased another floor (24,500 sq. ft, GFA) at The Gateway Tower 5 in Tsimshatsui.
The vacancy rate in Central rose to 7.7% as of end-August. Notwithstanding that some tenants opted to relocate to relatively more cost-effective locations, demand for premium office space in the submarket remained healthy. Notably, Chinese investment bank CICC reportedly took optionality expansion of up to 32,600 sq. ft (LFA) at One International Finance Centre as part of their renewal.
Alex Barnes, Head of Leasing Agency at JLL in Hong Kong said, "Despite a handful of buildings recording slight rental growth during the month, overall net effective rents dipped 0.1% m-o-m in August. Among the major office submarkets, Wanchai / Causeway Bay and Kowloon East experienced relatively larger rental decline, whereas rents in Central remained stable."
On the retail sector, Nelson Wong, Head of Research at JLL in Greater China, also noted, "Leasing momentum continued to improve in August. On the back of improvement in local consumption sentiment, retail sales saw an incremental growth of 7.6% y-o-y over the first seven months of the year. Domestic consumption is expected to be further stimulated by the consumption voucher scheme, driving retail sales growth in the coming months. Notably, a watch retailer has reportedly committed to a ground floor shop (1,500 sq. ft) at Imperial Building in Tsimshatsui for a monthly rent of HKD 700,000."