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Office rents in Central grow 1% m-o-m in September
Hong Kong, 19 October 2016 – Leasing requirements from PRC financial institutions in September underpinned leasing demand in Central's office market, according to JLL's Hong Kong Property Market Monitor released today.
About 70% of new lettings in the district, in terms of floor area leased, were from PRC financial institutions. Bank of Bohai expanded in–house at Two IFC while Shanghai Pudong Development Bank leased 11,200 sq ft (lettable) at One Pacific Place in Admiralty for its newly established investment banking arm.
Supported by growth in the mid-range of the market, Central's office rents grew 1% m-o-m to HKD109.8 per sq ft in September.
Outside of Central, insurers were active, leasing about 75,000 sq ft in Kowloon. Sun Life expanded in-house (34,700 sq ft, gross) at The Harbourfront Two in Hunghom. Rents in Tsimshatsui, however, retreated by 0.8% m-o-m to HKD 48.7 per sq ft as landlords softened their position on asking rents in an attempt to boost occupancy amid mounting supply side competition from new office developments in Kowloon East.
Alex Barnes, Head of HK Markets at JLL, said: "There is strong, unsatisfied demand at the pointy end of the Grade A market and it is almost entirely coming from PRC financial institutions. Traditional central demand drivers are less healthy with well reported headcount cuts in the Banking industry. This is yet to be realised in physical vacancy, in part due to the appetite of PRC demand for much of the space that may otherwise become vacant.
Denis Ma, Head of Research at JLL, said: "The inability for landlords to aggressively raise rents against relatively tight vacancy rates, in our opinion, underlines the inherent weakness that we continue to see in the city's office leasing market. Moreover, while the rise of PRC demand has been a positive for the market, it also emphasises how far demand in the broader market has tailed off. Coupled with the completion of new supply, we still hold the view that the rental market is nearing an inflection point."
Source: Research, JLL
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