Grade A office rents in Hong Kong’s CBD hit highest level since the Global Financial Crisis
Grade A office rents in Hong Kong’s Central district hit HK$107.4 per square foot, their highest level since the Global Financial Crisis in 2008, but property consultants expect the price growth to stabilise due to uncertainties in the global economy.
Property consultants said rents in Grade A buildings in the city’s Central Business District have been rising due to the tight vacancy environment.
Prices rose by 0.6 per cent month on month to HK$107.4 per sq ft, according to the latest report released by JLL on Wednesday.
The tight vacancy environment and demand for prime spaces in Central and Admiralty contributed to the rising rents, it said. But it curbed leasing activity with the total number of new lettings in Central dropping by 55 per cent month on month in June, according to JLL.
The vacancy level in the Central Grade A office market increased from 1.3 per cent in May to 1.4 per cent in June but was still the lowest among the main business districts.
Overall, the office rental take-up has weakened due to uncertainties in the global economy.
The gloomy global economic outlook, with the International Monetary Fund revising down its growth forecasts for all regions except mainland China and developing Asia in April this
year, will likely see business sentiment weaken further, which could negatively impact the property market, according to another property consultant Colliers International .
Rents in Central and Admiralty are likely to stabilise, while vacancy rates remain low owing to the slower but still active demand from mainland companies, Colliers said in its report released on Tuesday.
However, the Kowloon market is likely to face downward pressure, particularly in Kowloon East due to
cost cutting and downsizing efforts by cost sensitive tenants, particularly in the sourcing industry, said Colliers.
Another factor is a glut of new supply. Kowloon East will see the upcoming supply of around three million sq ft of office space next year, which will start its pre-leasing activities this year.
Owing to the weakening economic outlook and increasing new supply in 2017, Colliers expects overall grade A rents to stabilise in the second half of 2016.
For the whole year, overall grade A rents in Central and Admiralty will grow 5.5 per cent, Island East will grow 4.8 per cent but Kowloon East is likely to drop 4.8 per cent, it said.