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News Release

HONG KONG

Central’s rising rent triggers tenants to consider relocation

Vacancy rate in Central drops to 1.7%


HONG KONG, 20 July 2015 – Tight supply and rising rentals in the Central Grade A office market is triggering some tenants to consider relocation, according to JLL's monthly research report, Hong Kong Property Market Monitor, in July.

Net take-up in overall Grade A office market increased by 87 percent from 133,900 square feet in May to 250,000 square feet in June. About half of the overall take-up came from the Central office market—approximately 127,000 square feet.

The sustained demand from financial institutions in the mid-range of the market caused the vacancy rate in Central to drop further from 2.3 percent in May to 1.7 percent last month, the lowest monthly level since November 2008. PRC companies remained a key driver of demand with a mainland China financial institution's lease of a whole floor with a lettable area of 11,200 square feet at Three Exchange Square among the most notable.

The tight vacancy situation saw more landlords turn optimistic on office rents with Grade A office rents in Central rising by 2 percent in June. Central's Grade A office rental grew 7 percent in the first half.

However, the rising rents triggered some tenants to consider relocation to more cost-effective space and decentralisation. One insurance company will relocate some of its offices out of Central after leasing offices with a lettable area of 40,700 square feet at One Island East in Quarry Bay.

Denis Ma, Head of Research at JLL Hong Kong, said: "With availability now extremely limited in Central, tenant decentralisation is likely to gather momentum over the coming months. Although vacancy outside of Central is also tight, there are pockets of contiguous space available in the market, including recently and soon-to-be-completed Grade A office buildings such as 8 Observatory Road in Tsimshatsui and Tower 535 in Causeway Bay."

Grade A office vacancy rates
DistrictsOverallCentral

Wanchai/

Causeway Bay

Hong Kong EastTsimshatsuiKowloon East
end-June3.5%1.7%2.3%1.0%1.5%6.1%
end-May3.7%2.3%2.5%1.2%0.6%6.2%

Source: Research, JLL​

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