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News Release

Hong Kong

JLL: Central’s Grade A office will grow 5-10% in 2016

HONG KONG, 9 December 2015 – Demand for Grade-A offices has surprised on the upside this year, with net take-up in the overall market reaching 2.9 million sq ft in the first 11 months, its highest level since 2010. Net take-up was largely driven by expansion and relocation demand along with the realisation of pre-commitments in newly completed buildings such as One Bay East.

The Shanghai-Hong Kong Stock Connect pilot programme boosted new set-up and expansion requirements from mainland Chinese financial services in the market, particularly in Central. Mainland Chinese firms were among the most active in the market, accounting for about 35% of all leased floor space and 40% of all new leasing transactions in Central this year.

Buoyed by robust leasing demand and the realisation of pre-commitments, vacancy rates decreased across most major submarkets, with the exception of Tsimshatsui. The overall vacancy rate tightened from 4.1% at the end of 2014 to 2.9% at the end of November, a 10-year low. The vacancy rate in Central was down to just 1.2% – back at the level just prior to the 2008 Global Financial Crisis – thanks to robust demand from larger occupiers and mainland Chinese firms. The vacancy rate in Kowloon East remained the highest among all major office submarkets, standing at 5.5% at the end of November, though vacancy remained largely concentrated in a handful of "built-for-sale" strata-titled buildings in Kwun Tong.

The tight vacancy environment provided landlords the upper hand in rental negotiations. Rentals in all major office markets recorded positive growth, with rents in the overall market growing by 8.6% through the first 11 months of 2015. Rents in Central advanced 12.4% over the same period and surpassed HK$100 per sq ft for the first time since the Eurozone Crisis in the fourth quarter of 2011. As at the end of November, average monthly rent of Grade-A offices in Central stood at HK$101.5 per sq ft.

"Given the dour economic outlook for Hong Kong, leasing demand is expected to moderate in 2016," explained Ben Dickinson, Head of Markets at JLL Hong Kong. "Still, we believe strong policy support from mainland China – such as the expected launch of Shenzhen-Hong Kong Stock Connect – should translate into greater demand from mainland Chinese financial services firms, especially in Central. Given the lack of office supply in core business areas, we expect the rents in Central to grow 5-10% next year. For the overall Grade-A office market, we forecast rents to climb 0-5%. The tight office supply in Central and a return to positive rental reversions will also drive companies to once again consider relocating to other business districts such as Hong Kong East."

Hong Kong Prime Office Indicator – % Change




2016 Rental Forecast
Wanchai/Causeway Bay+6.5%+0-5%
Hong Kong East+2.0%+0-5%
Kowloon East+2.6%-0-5%