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News Special


Decentralisation and Demand in the World’s Priciest Office Market

Central’s offices are world’s most expensive, but new supply in non-core districts offer affordable alternatives


Rents for premium office space in Hong Kong's Central district have once again ranked as the world's most expensive in 2016, surpassing London and New York. Hong Kong's highest rents hit US$302 per square foot, versus US$197 for London's West End and Midtown New York at US$194. Central's rents are projected to rise by up to 5% this year, outperforming all of Hong Kong's other business districts, where average declines of up to 5% are forecast.


Central rents surged by 9.2% in 2016 on the back of mainland Chinese tenants' willingness to pay premium rents and to bid intensely for space in trophy buildings. This PRC-driven demand subsequently drove some multinationals to seek advantageous rents in non-core districts, where new supply is curbing rental increases. Rents in Kowloon East are forecast to fall by between 10- and 15% this year. 

"Central will still be the focal point for the business community but non-core districts are rapidly emerging and we will see a broader tenant mix across the city," predicts Ben Dickinson, JLL Hong Kong's Head of Agency Leasing. 

"It just takes a pioneer like a major multinational investment bank such as Citi to head to Kwun Tong's Citi Tower and other financial institutions, legal and insurance firms will follow suit," he says, admitting he would never have anticipated such a situation four years ago. JP Morgan also recently signed a deal for a large back-office consolidation in Kowloon East. 

In the absence of one dominant landlord, competition is heating up among Kowloon East's landlords to attract prominent anchor tenants. In doing so, they are aiming to lure tenants away from markets like Tsim Sha Tsui, Causeway Bay/Wan Chai and Hong Kong East, triggering a ripple effect whereby those other districts may be forced to lower rents to retain tenants. 

"Central's rents will hold this year and edge up for most of 2017, but in the latter stages of the year when rents in Wan Chai, Causeway Bay, Tsim Sha Tsui and Hong Kong East start to tail off, we'll see Central's landlords change tack," explains Dickinson. "In 2018 and 2019 we'll see a correction across the market as new office supply comes online and takes time to be absorbed."

He admits it can be seen as "unhealthy" for Hong Kong to boast the world's highest rents. "For an overseas multi-national, Central is a very expensive location for a regional headquarters," says Dickinson.  
"Other cities in the region can offer high quality space at a much cheaper price, although these locations don't have the geographical or professional benefits Hong Kong offers."

That said, new Grade A office space in Hong Kong East commands sub-HKD 50 per sq ft,  compared to HKD 150 per sq ft in Central, and it is only a 10-minute commute away.

For more information about office leasing in Hong Kong, visit our dedicated webpage, or contact Ben Dickinson.