Hong Kong office rents rebound to late-2021 levels in April

Rents in Central inched up 0.9% to HK$114.5 per sq ft.

A report by Knight Frank reveals that leasing momentum on Hong Kong Island continued to gather pace amid the easing of the fifth wave of COVID outbreak. There was a continued uptick in activity, and rents in several areas rebounded to the level in late 2021. 

Central and Wan Chai saw a slight increase of 0.9% and 0.8% over the past six months, reaching HK$114.5 and HK$53.6 per sq ft, respectively. 

Here’s more from Knight Frank:

Central outperformed other areas in activity level and maintained a low vacancy rate for premium office space. Some multinational corporations (MNCs), especially those in the financial industry, have been actively seeking space in sought-after Grade A buildings in Central for upgrade and expansion amid stabilised rents. For instance, U.S. financial services company Jefferies Group relocated its office from Cheung Kong Center to Two IFC with 27,600 sq ft, while Jane Street, a U.S. proprietary trading firm, expanded its footprint in Chater House during the month. 

Going forward, we expect the ‘flight-for-quality’ trend to grow as companies, in particular those involved in the financial markets, see the benefits of being part of the CBD ecosystem. Office tenants are taking advantage of attractive rents to lock in leases in premium buildings before the full recovery of the market and the next office rental up-cycle becomes imminent. Therefore, we expect to see continued improvement in leasing momentum, especially in the CBD area, in the second half of the year. 

Kowloon 

The Kowloon Grade A office market demonstrated much stronger momentum in April. More on-site inspections were recorded as the fifth wave of the pandemic subsided. With improved business sentiment, there were more sizable new letting cases of over 10,000 sq ft in the market. Government departments took up one floor in Landmark East – AIA Kowloon Tower and another three floors in Spectrum Tower. 

The total new lease area amounted to 50,800 sq ft. Apart from the public sector, fintech and Chinese mainland enterprises were the major sectors that fuelled the momentum in April. Cryptocurrency firm Bybit leased 23,400 sq ft in Gateway Tower 5, while Chinese start-up company Taikang Insurance leased 21,150 sq ft in the same building. 

Although some sizable transactions were recorded during the month, most of the activity in the Kowloon market was still dominated by small and medium-sized deals of 3,000 sq ft or below, at an average rent of about HK$22 per sq ft. 

With the fifth wave of the pandemic under control, we expect tenants to continue to take a wait-and-see approach and rents to remain stable in the coming three to six months. Only if the borders are reopened and more favourable indicators are displayed will business confidence be further strengthened, and the leasing market rebound in the last quarter of the year.