Landlords in Central, Hong Kong slash rents by more than a third as vacancy climbs to six-year high amid economy crushed by coronavirus
- Rents in the world’s most expensive office market return to 2017 levels as companies downsize or move somewhere cheaper to save costs
- The Center recently leased office space for HK$55 per square foot, the lowest monthly rate since April 2016 in the world’s most expensive building
Hong Kong’s major landlords of premium office space in Central are cutting rents by more than a third – returning them to 2017 levels – as the sharp economic contraction caused by the coronavirus forces corporate tenants either to downsize or move somewhere cheaper.
The vacancy rate in Central, the world’s costliest office market, climbed to a six-year high of 4.4 per cent in March, said JLL.
Taking advantage of the lower rent, mainland Chinese private equity investor Hony Capital has leased 10,000 square feet at the 88-storey Two International Finance Centre – the city’s second-tallest office tower – for HK$130 per sq ft, about 35 per cent lower than the building’s peak rate in 2017, according to market watchers.
The new lease will cost the Beijing-based firm, a unit of investment holding company Legend Holdings, a monthly rental of HK$1.3 million. The firm is downsizing by 23 per cent from its 13,000 square foot office at Exchange Square. The average asking rent at Exchange Square was HK$150 per sq ft at the end of April, according to CBRE.
About a 15-minute walk from TWO IFC, another company took up 4,000 square feet of office space at The Center for HK$55 per sq ft per month, the lowest rate since April 2016 in the world’s most expensive building.
“Our figures show Central’s grade-A office rents have dropped 9.2 per cent in the first three months and we expect it will drop 25 to 30 per cent this year,” said Nelson Wong, head of research at JLL in Greater China.