Decline In Hong Kong Office Rents Eases To 0.8%
HONG KONG – The drop in Grade A office rents in the Chinese territory has moderated again as office leasing activity gradually recovered as the 5th wave of the COVID-19 pandemic abated since April, revealed a report from Cushman & Wakefield (C&W) that was published on Thursday evening (7 July, SGT).
According to the property consultancy’s report entitled “Hong Kong Office and Retail Leasing Markets Review and Outlook Q2 2022, the overall rents of Grade A office space across the city dipped by 0.8 percent quarter-on-quarter in Q2 compared to the 0.9 percent slide seen in Q1 2022.
“By submarket, Hong Kong East and Kowloon West experienced steeper drops in rents at 1.6 percent quarter-on-quarter and 2.0 percent quarter-on-quarter respectively,” noted C&W.
So far this year, Hong Kong Grade A office rents have fallen by 1.7 percent, but compared to its peak in April 2019, it has plunged by 27 percent. This has made workspaces at a relative bargain level, especially in the core central business district (CBD) predominantly occupied by financial institutions.
“Non-core areas have also continued to attract tenants with expansion and cost-saving opportunities,” said the property consultancy, adding that it expects Grade A office rents in the city to fall further by 1 percent to 2 percent in the second half of the year, while the recovery would be led by the core CBD districts.
Despite a good number of new leasing transactions registered in the second quarter, expired and expiring leases during the period increased available office space, and this has dragged down overall office space net absorption to -176,900 sq ft.
Aside from that, total Grade A office availability rose marginally by 0.2 percentage points on a quarterly basis to 13.8 percent. However, Cushman expects overall office availability to hit 16 percent to 17 percent by the end of the year.
Looking ahead, C&W Hong Kong’s Head of Project and Occupier Services John Siu disclosed that several major Grade A office developments in non-core districts are expected to be completed in the second half of the year, generating a combined floor area of 2.5 million sq ft.
“The upcoming supply will likely attract expansion, upgrading, relocation and cost-saving opportunities, prompting the decentralization trend to continue.”
Nonetheless, the coworking space as well as the healthcare and medical aesthetics sectors are forecasted to increase the absorption of the new upcoming office supply.