New completions drive overall vacancy rate up in October
According to JLL's latest Hong Kong Property Market Monitor report, the vacancy rate of Hong Kong's overall Grade A office market slightly rose to 11% as of end-October 2022 from 10.5% a month ago due to new completions.
The increase in vacancy rate was driven by the completion of Two Taikoo Place in Quarry Bay and 1 Sha Tsui Road in Tsuen Wan. The vacancy rates in Central and Wanchai/Causeway Bay rose marginally to 8.4% and 9.7% respectively, while Tsimshatsui's vacancy rate retreated to 11% from 11.2%.
The overall net absorption was 479,000 sq ft in October, mainly due to the realisation of pre-committed space in new completions during the month.
Alex Barnes, Managing Director at JLL in Hong Kong said, "The new completions have driven the vacancy rates to edge higher. However, we have found that many tenants are taking the opportunity to upgrade their office spaces as there are more choices available in the market. The new quality office buildings would be welcomed by these kinds of tenants."
One of the major transactions was BOC Group Life Assurance leasing 23,400 sq ft (GFA) at The Gateway Tower 5 in Tsimshatsui, relocating and upgrading from the World Finance Centre within the Harbour City portfolio.
Nelson Wong, Executive Director of Research at JLL also commented, "Overall net effective rents dropped further by 0.6% m-o-m in October. Among the major office submarkets, rentals in Wanchai / Causeway Bay and Tsimshatsui dropped slightly by 0.2% and 0.1%, respectively, while rents in Central registered the largest drop of 0.6%."