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HONG KONG

New Lettings in the office market down 35% on last year’s average monthly level

Central’s office rents continue to climb higher, up 1% in March.


Hong Kong, 20 April 2016Leasing activity remained subdued with the total number of new letting dropping to 36 transactions in March, about 35% below the average monthly level recorded in 2015, according to research in JLL's latest Monthly Market Monitor released today. 

The drop in the total number of new lettings was mainly because of the tight vacancy environment, which has provided few options for tenants.

Coupled with expiring leases, all major office submarkets with the exception of Hong Kong East recorded net withdrawals, leading the overall occupier market to contract by 26,600 sq ft, its worse performance in four months. In Hong Kong East, the vacancy rate declined to 0.8% from 1% in February, largely supported by the Government's lease of a whole floor at AIA Tower in North Point.

Average Grade A office rent in Central increased by 1% m-o-m to HK$105 per sq ft. While the vacancy rate did edge higher, it remained at an extremely low level of 1.4%.

In the investment market, transactions in Central accounted for about 60% of total volume in March, as investors continued to eye office properties in the submarket to ride on the rental recovery.

Alex Barnes, Head of Hong Kong Markets at JLL, said: "New leasing activity has been slow on the back of tight vacancy; there are just simply too few options for tenants in core markets today.  Tight vacancy will remain an issue for tenants until new supply hits the market in 2017.  New supply will open up options for tenants, particularly those in Central, who are currently constrained for size and opportunity to reduce their rent exposure."

Denis Ma, Head of Research at JLL, said: "In spite of the rough start to the year for global financial markets and a fresh round of layoffs in the banking sector, Hong Kong's office market has remained resilient through the first quarter. In Central, the low vacancy environment is and will continue to supported by expiring leases being at its lowest level in five years. As a result, rents are up 2.5% in the first quarter and we remain confident that we will achieve our growth target of 5-10% in 2016."

Grade A Office Vacancy Rates
PeriodOverallCentral

Wanchai /

Causeway Bay

Hong Kong EastTsimshatsuiKowloon East
End-March 3.3%1.4%2.4%0.8%1.9%5.2%
End-February 3.3%1.3%2.2%1.0%1.8%5.2%

Source: Research, JLL

 

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