Grade A office rents on Hong Kong Island down 1.2% in June

North Point recorded the steepest decline YTD.

According to a Knight Frank report, Grade A office leasing demand remained stagnant in June due to weak economic conditions and the summer holiday. In June, the overall Grade A office rent on Hong Kong Island continued to fall, recording HK$63.8 per sq ft, down 1.2% year to date (YTD). 

Among the major submarkets, Central, Admiralty and North Point recorded a larger rental decline of -2.6%, -3.1% and -5.1% YTD, respectively. 

Here’s more from Knight Frank:

The overall vacancy rate on Hong Kong Island remained high, reaching 13.4% in June. The high vacancy rate is exerting considerable pressure on landlords to offer generous incentives to attract tenants. Overall, these factors suggest that tenants have more bargaining power in the current market. 

On the bright side, new letting cases dominated the leasing market in June, with most of the leasing activity in Central. The major take-up sources were primarily from the professional and financial companies. Examples include Dymon Asia Capital, which leased a 7,000-sq-ft space in Edinburgh Tower in Central. The recentralisation and flight-to-quality trends persisted amid the soft market. Dun & Bradstreet, a company that provides commercial data and analytics, relocated from Kowloon East to Six Pacific Place with a floor space of 7,348 sq ft. 

There have been continuous inquiries and new demand from Chinese mainland companies about setting up offices in Hong Kong. For example, Gayun Capital Ltd, a new Chinese mainland company leased an 11,000-sqft space at One IFC in Central during the month. 

Looking ahead, GFA of approximately 930,000 sq ft of future Grade A office supply, mainly in Central and Causeway Bay (around 500,000 sf of this will come from One Causeway Bay), is expected to be completed by 2025. We believe the spotlight will be on these new Grade A office buildings, given an increasing number of enquiries on the new buildings from tenants. New leasing in Hong Kong’s Grade A office market will be driven by upgrades and relocation demand, as more new offices are scheduled for completion.