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The only office market carrying double digit vacancy rate
Hong Kong, 17 November 2016 – Kowloon East has overtaken Wanchai/Causeway Bay to become the city's second largest office market in terms of floor space, according to JLL's Hong Kong Property Market Monitor released today.
The jump up the rankings followed the completion of Goldin Financial Global Centre in Kowloon Bay, which added an extra 602,400 sq ft and bolstered total Grade A office stock in Kowloon East to 15.4 million sq ft, trailing only Central. The realisation of pre-commitments at the building contributed to net take-up of about 68,000 sq ft in the overall market. Still with the new supply, the vacancy rate in Kowloon East increased to 10.7%, the highest among all of the city's key office submarkets.
In Central, several whole floor lease expiries along with relatively slow demand and tight vacancy kept net take-up below 10,000 sq ft for the third consecutive month. Leasing activity was largely underpinned by expansion and upgrading requirements from PRC companies. Much of this demand is captured in pre-leasing transactions of not yet available space.
However, led by growth and pent up demand in the top-end of the market, Central rentals continued to rise to reach HKD110.4 per sq ft, albeit at a slower pace, up 0.6% m-o-m. In Wanchai/Causeway Bay, tightening vacancy rates saw rentals advance by 0.9% m-o-m, their strongest increase in a month this year.
Alex Barnes, Head of Hong Kong Markets at JLL, said: "With its big office floors and low rents, Kowloon East will continue to attract businesses from Hong Kong Island. The ability for Kowloon East to develop into a front office location for the finance sector is challenging due to fragmented ownership, lack of office clustering and amenity."
Denis Ma, Head of Research at JLL, said: "With vacancy rates in Kowloon East now at their highest level in 5 years, and set to climb higher over the coming 12-months, the ability for landlords outside of Central to drive rents higher will become increasingly limited. Coupled with the still rising rental environment in Central, we expect more tenants to consider decentralisation over the coming 12-months."
Source: Research, JLL
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