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Recovery of the Central Grade A office gathers momentum
Hong Kong, 21 June 2015 – Research in JLL's Hong Kong Property Market Monitor in June shows that half of the net take-up recorded in Central in May was from mainland China companies, contributing to rents in the city's premier office market to grow by 2.5% during the month.
Net take-up in Central amounted to 55,200 square feet last month, with half of the office space being leased by mainland firms. The sustained demand from mainland China firms caused the vacancy rate in Central to tighten to 2.3% after having already declined to the lowest monthly level since November 2008 at the end of April.
Leasing activity was largely concentrated in the mid-range of the Grade A office market with the vacancy rate for Grade A2 buildings falling to 3.1%, its lowest monthly level since November 2008.
"The relative success of Shanghai-Hong Kong Stock Connect along with plans to open up more cross border investment channels between Hong Kong and Mainland China has led to a notable uptick in leasing demand from Mainland China investment firms and those providing financial services and securities trading," said Denis Ma, Head of Research at JLL, HK.
"The demand from Mainland China companies contributed to rents in Central posting their strongest monthly advance in four years, growing by 2.5% in May and lifting year-to-date (YTD) growth to 4.9%."
Citibank Plaza has been one of the Grade A office buildings that has benefitted from the demand recovery. Over the past 6 months, over 180,000 square feet of new lettings has been transacted in the building, pushing the occupancy rate in the building to close to 95% by the end of May. The building has been able to absorb some of the larger requirements in the market this year, including China's largest privately owned financial conglomerate, which leased 17,000 square feet in April.
Outside of Central, leasing activity was dampened by limited availability. In Kowloon East, the office market with the highest vacancy rate, net take-up was limited by the lack of sizable premises available for lease. Excluding the 728,400 square feet of pre-commitments in the newly completed One Bay East, net take-up in the submarket amounted to 51,800 square feet, primarily driven by sales activity in newly completed Grade A office buildings, including TG Place at 10 Shing Yip Street and 15 Chong Yip Street in Kwun Tong.
Source: Research, JLL
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Yvonne Liu (Hong Kong)
Senior Public Relations Manager