HK Office Leasing Weakened In June

HONG KONG – Net office absorption in the Chinese territory fell into negative territory in June 2022 after eights months of positive figures driven by flight-to-quality, according to Jones Lang LaSalle’s (JLL) latest property market monitor that was published on Wednesday (20 July), SGT).

In June, net absorption of Grade A office space in Hong Kong reached -96,800 sq ft. Despite the negative figure, some cases of expansion were seen in the market. For instance, Fubon Life Insurance agreed to occupy 12,350 sq ft at 12 Taikoo Wan Road in Quarry Bay for relocation and expansion within the same office tower.

“It is normal to see take-up rate under pressure as the leasing market is disrupted by the pandemic. There are companies looking to expand in core business districts” given the discounted office rents, said Paul Yien, Executive Director of office leasing advisory at JLL in Hong Kong.

However, overall office vacancy in the city edged up from 9.3 percent in May to 9.4 percent in June. In particular, that in Central increased from 7.6 percent to 7.9 percent, while that in Tsim Sha Tsui improved from 10.5 percent to 10.2 percent.

As for rents of Hong Kong Grade A office space, it declined slightly during the period under review. Overall net effective rents dipped by 0.1 percent to HK$57.3 psf per month in June as compared to the preceding month.

“Among the major office submarkets, Central’s office rents remained flat, while Wanchai / Causeway Bay registered a relatively larger rental drop. Having said that, the magnitude of rental changes in the various submarkets remained small,” noted JLL.

Meanwhile, office transactions in Hong Kong were primarily fueled by primary sales. Three high-zone office floors at Novo Jaffe in Wanchai were purchased by Golden Resources for self-occupation at a consideration of HK$159.5 million, which works out to HK$23,700 psf based on its gross floor area (GFA).