Office Rents Across Hong Kong Down 5-13%
HONG KONG – A research note published by brokerage firm CGS-CIMB on Tuesday shows that office rents in key business districts on Hong Kong Island declined by 5 percent to 13 percent on an annual basis in Q3 2021, reported The Business Times on Wednesday noon (3 November, SGT).
Nonetheless, office rental demand has picked up as businesses took advantage of falling rents to consolidate their workspaces.
“As Central office rents are back at pre-financial crisis levels of 2007, we think the level is attractive enough for corporations which left Central to return, leading to office ‘recentralisation’.”
“This new trend should benefit large office landlords in Central, such as Hongkong Land, in our view,” said CGS-CIMB analyst Raymond Cheng.
Due to this upbeat view, CGS-CIMB raised its target price for Hongkong Land from US$5.48 to US$6.30 and maintained its “add” call on its shares, amidst expectations that employees would return to their workplaces in Hong Kong.
Notably, the vacancy level of Hongkong Land’s office properties in Central reached 6.4 percent at the end of the first 6 months of the year, and this is better than the overall 7.4 percent vacancy for office space in the city’s main commercial hub.
Cheng noted that although the office landlord may continue to see negative rental reversions until the end of this year, the lower office rents make Hongkong Land’s assets attractive for retaining or securing major tenants.
Looking ahead, the analyst believes that overall office vacancy in Hong Kong has peaked in H1 2021 and it would ease during the last quarter of the year and during the first half of 2022, given that the local authorities intend to reopen borders with mainland China.