According to JLL's latest Monthly Market Monitor released this week, after two months of negative growth, net take-up on Hong Kong's Grade A office market rebounded by 51,800 sq. ft. in April 2016. Leasing activity was largely recorded in office markets outside Hong Kong's Central district.
First international law firm relocates to Quarry Bay
With rents continuingly to edge higher and the vacancy rate of Grade A offices in Central standing at just 1.4% at the end of April, many companies sought office space in other business districts. One of the more notable transactions was international law firm, Berwin Leighton Paisner (BLP), which signed a six year lease with Swire Properties to relocate its Hong Kong office out of Central district into 15,000 sq ft in Dorset House. This marks the first time, an international law firm has opened an office in Quarry Bay.
BLP instructed JLL to advise on the new office search and location. BLP's new offices will also incorporate modern client facilities including a flexible seminar and conference space to allow for large scale professional events. The law firm believes the modern and collaborative environment will enable them to enhance their services to the clients.
Causeway Bay & Kowloon East benefit from industry agglomeration
In Causeway Bay, the newly developed Tower 535 benefited from the increasing demand from new set-ups with WeWork, a US-based coworking space operator, leasing eight floors of the building for their new operation centre. This is WeWork's first foray into the local market and part of their aggressive expansion plans in the region. Kowloon East is fast becoming the city's new office hub for the shipping and logistics sector. Swiss logistics provider Kuehne + Nagel are the latest to relocate to the submarket after securing 46,500 sq ft at Manhattan Place in Kowloon Bay.
Rents in all submarkets on Hong Kong Island continued to trend higher, albeit marginally, against a tight vacancy environment. Average grade A office rents in Central climbed 0.5% m-o-m to HKD105.6 per sq ft in April.
Alex Barnes, Head of HK Markets at JLL commented, "Law firms are increasingly looking at their costs and workplace strategy. Tight vacancy and high rents in Central will only encourage further moves to nearby districts like Quarry Bay where a cluster of their client base is located,"
"Increasingly, companies are looking at commercial districts where businesses can accommodate growth, new workplace change, and lower occupancy costs. The strong demand we've seen for offices in Quarry Bay and the smaller Wong Chuk Hang market are examples of this," he added.
Denis Ma, Head of Research at JLL in Hong Kong also commented, "Although headline vacancy rates remain tight across all districts, tenants will gradually see opportunities opening up in the market over the coming months. In the next three months alone, about 860,000 sq ft (0.9% of total stock) of floor space is set to be vacated upon lease expiry with Kowloon East to provide the most opportunities. This significant amount of marketable space has been one of the reasons why rental growth has been so anaemic despite vacancy rates being at such low levels."