Overall office rents record the sharpest monthly fall in more than 10 years
Central office vacancy rate rises to the highest since March 2015
HONG KONG, 21 November 2019 – Subdued leasing demand led to overall Grade A office rents dropping by 1.6% m-o-m in October, the sharpest monthly fall in more than 10 years, according to JLL’s latest Monthly Property Market Monitor released today.
Figures from JLL showed the average Grade A office rents in the overall market have dropped to HKD74.3 per sq ft in October. Central’s Grade A office rents recorded the largest fall for the month, dropping by 2.3% to HKD122.1 per sq ft. The rental falls are largely due to a rise in vacancy, particularly in Central where the vacancy rate rose above 3% for the first time since March 2015.
The Central office market recorded negative net absorption of 101,100 sq ft in October as persisting uncertainty contributed to a 49% m-o-m drop in new lettings. Some landlords are facing difficulty in backfilling whole floors left by tenants relocating out of Central due to a lack of expansionary activity within the market.
Alex Barnes, Head of Markets at JLL, said: “The overall office market recorded a net withdrawal of 188,500 sq ft last month, the third consecutive month of negative net absorption recorded across the market. Leasing demand in the city was focused in decentralized office submarkets as new lettings in these precincts made up 70% of the total.”
Cathie Chung, Senior Director of Research at JLL, said: “Since the investment risk in the city’s office market is increasing, developers would be more cautious in the bidding for commercial sites. The tender for the 5.97-hectare commercial site at West Kowloon Station that will close this Friday may be affected. The government could potentially attract a higher price if it were to divide the site into different phases, making the price for each phase lower which would attract more developers.”
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