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Central’s Grade-A office rents up 1.4% in November
HONG KONG, 21 December 2016 - Leasing demand for Grade-A offices remained relatively weak in November with the total number of new lettings dropping by 17% m-o-m to a level about 40% lower than the five-year monthly average, according to research in JLL's latest Monthly Market Monitor released today.
Coupled with the withdrawal of Warwick House in Quarry Bay ahead of its demolition, the overall market recorded negative net take-up of 372,500 sq ft.
Despite subdued leasing activity, Central saw the vacancy rate of the Grade-A office market stand at a very low level of 1.5%, with rents up 1.4% m-o-m to HKD 111.9 per sq ft per month. PRC demand accounted for about 70% of all new lettings in the district, almost double the average monthly share over the last two years, in terms of floor area leased.
Kowloon East's development into the city's second CBD received a boost with JPMorgan pre-leasing 225,000 sq ft (gross) at 77 Hoi Bun Road, a new Grade-A office jointly developed by Link REIT and Nan Fung, in Kwun Tong. The bank intends to consolidate a number of operations into the building while maintaining its regional headquarters in Central. The new building is scheduled to be completed in 2019.
Alex Barnes, Head of Hong Kong Markets at JLL, said he expects Central to maintain rental growth in the coming months, on the back of limited supply and PRC corporate appetite for premium offices. "Leasing demand has been capped by a tight vacancy environment but sustained PRC demand in Central has helped push up rents to HKD111.9, about 4% shy of the all-time high set in 2008 just prior to the Global Financial Crisis. The recent launch of the Shenzhen-Hong Kong Stock Connect should further drive up demand from PRC financial services firms in Central," Barnes said.
Denis Ma, Head of Research at JLL in Hong Kong, said: "With vacancy rates remaining at very low levels in and PRC demand continuing to sustain, we have revised our forecast for the Central Grade-A office market from declining growth to positive growth in 2017; in the range of 0-5%. Ultimately, the rental market in Central will only go as high as PRC demand can take it given that an increasing number of tenants are now looking at options beyond Central."
Source: Research, JLL
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