Cost-savings push behind rise in office vacancies
The office vacancy rate in Central and Admiralty jumped from 5.3 per cent in the fourth quarter to 6.4 per cent between January and this month, according to property consultant DTZ.
Still concerned about the uncertain outlook for the global economy, local companies remained cautious about expansion plans.
The Hong Kong office market in the first quarter was quiet, with minor leasing activities mostly driven by cost saving, said DTZ, part of UGL Services, in a review of the performance of the sector since January.
Overall take-up of office space bounced back mostly because the owner of a new office building in East Kowloon used the entire 350,000 square foot space for itself.
However, the take-up on Hong Kong Island remained lacklustre. It fell in Central and Admiralty, where the volume of vacant space has increased from 168,017 square feet in the fourth quarter to 291,194 square feet.
Alva To, DTZ's head of consulting for greater China, said: 'Central has been simultaneously affected by weaker demand and an increase in vacant space this quarter.
'The weakening of demand was the result of a general hold-up of expansion plans, especially among companies in the financial sector.'
There were also fewer mainland companies conducting initial public offerings of shares on the Hong Kong exchange, a business which would encourage the opening of offices, he said.
The increase in vacant space was partly due to the relocation of some companies which, according to lease arrangements made previously, had signed up for premises elsewhere but did not move out until this quarter, DTZ said.
However, it said, 'the leasing of smaller floor plates and secondary business space in Central/Admiralty has been comparatively more active this quarter. The rentals were deemed more attractive for companies who were interested in settling in the prime location'.
The subdued market similarly affected Wan Chai, Causeway Bay and Tsim Sha Tsui. East Kowloon had the biggest take-up this quarter, at 333,749 square feet, mostly due to the owner of a recently completed building leasing the space itself.
The vacancy rate of office space in Central and Admiralty in the first quarter of this year, up from 5.3 per cent in the fourth quarter