Big changes coming to Hong Kong’s Central office district, says JLL

Hong Kong’s Central district will begin to lose tenants and drop rents as the city’s property market goes through a radical shift in coming years, according to a local expert.

JLL’s head of Agency Leasing Ben Dickinson said with vacancy rates in Central low and rents expanding off the back of mainland Chinese companies “warping” the market, a new wave of property in 2017 and 2018 will shake up Hong Kong’s property scene.

“I think that the changes I’ve seen in my first 15 years in Hong Kong will be completely dwarfed by the changes I see in the next five to 10 years,” he said in an interview with the South China Morning Post.

Hong Kong’s Central district has traditionally been a influential and attractive office location for big multinational companies and, in recent times, Chinese companies making their first moves internationally.

But Dickinson said it was important for the continued growth of Hong Kong for new, premium office space to be found as soon as possible.

“Companies have nowhere else to go unless developers are prepared to develop some of the older buildings [in Central]... they’re not going to go west to Sheung Wan, and Admiralty’s kind of done in a sense,” he said.

“So if Hong Kong is to maintain its position in the region it has to find a way to grow.”

In December, property analysts said a growing interest by mainland Chinese banks and securities firms in prime Central office space could push up rents.

Dickinson said affluent Chinese companies, willing to pay big prices to secure prestigious office locations, were contributing to higher rents in Central.

“They come down really with a mandate to make a bit of an entrance, make a bit of a splash into the market... I won’t say it’s a ‘money no object’ exercise but in terms of leasing it is getting close to that,” he said. “That has warped the rental position of Central a little bit.”

Dickinson said the completion of several big new office projects around Hong Kong after 2017 would change the face of the city’s property scene.

“In 2017, 2018, the story will be very different – [you’ve got] Swire’s new development down in Quarry Bay, we’ve got Hysan’s new development in Causeway Bay and one or two others, such as Asia House which will be complete in 2019,” he said.

“We’ll see rents probably just come off in Central and recorrect a bit, as tenants look at their rents in Central and then outside at brand new top of the line buildings going at 50 per cent of the price they’re currently paying.”