Office rents on Hong Kong Island slip 0.3% in July

Causeway Bay rents declined 0.7%.

According to a Knight Frank report, overall net effective rents on Hong Kong Island were HK$67.5 per sq ft in July, dropping 0.3% MoM and 2.8% year to date (YTD). 

Among the major submarkets, overall Central and Causeway Bay recorded a larger rental decline at 0.6% and 0.7% MoM and 4.8% and 4.7% YTD, respectively. 

Here’s more from Knight Frank:

Over the past month, there has been a more obvious cost savings trend involving downsizing or relocating to decentralised areas. Meanwhile, the flight-to-quality trend persists. Some less cost-sensitive occupiers took the opportunity of the rental downturn for office quality upgrades with a similar budget. 

Most of the leasing transactions involved small to medium-sized office space of about 3,000 to 4,000 sq ft. For instance, an investment management firm upgraded its office from Man Yee Building to Two IFC. 

Supported by more affordable rents, office space in Wan Chai, Causeway Bay and Quarry Bay has been gradually filling up, driving down vacancy rates to 10.2%, 8.9% and 15.1%, respectively, in July. Compared to decentralised areas, we expect a potential upward trend in Central’s vacancy rate in the near term due to the continued cost-saving trends involving decentralisation and downsizing.