Gloomy outlook for Central office rents in Hong Kong, as economic storm clouds gather, analysts say

Monthly office rentals in Central began to soften in November, ending a three year trend of rising rates

Gathering economic storm clouds are likely to put further downward pressures on rents in 2019, with analysts forecasting declines of up to 6 per cent

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Grade A office rents in Central are likely to decline in 2019, extending a downtrend that began in November. The monthly decline follows a nearly three year uptrend for rental prices in the city’s core business district. Photo: EPA

Published: 11:02am, 23 Dec 2018Updated: 10:49pm, 23 Dec 2018

Rents of grade A offices in Central, the most expensive globally, could see a decline of up to 6 per cent in 2019 after they dropped for the first time in November amid growing trade and economic concerns, according to analysts.

Monthly office rents in Central and the surrounding areas of Sheung Wan and Admiralty will fall by 4 to 6 per cent to about HK$154.90 (US$19.79) per square foot, according to Cushman & Wakefield.

“The ongoing trade dispute between the US and China, coupled with continued tightening capital controls in China, will cause a slowdown in economic activity,” said Keith Hemshall, head of office services at the consultancy.

Colliers International also forecast a downbeat year for leasing rates in Central and Admiralty, with monthly grade A office rentals to decline 3.8 per cent in 2019.

“Mainland companies have lost their growth momentum amid geopolitical and economic uncertainty,” said Zac Tang, assistant manager of research at Colliers, citing the consultancy’s Hong Kong Annual Occupier Survey Report 2018.

“In addition, we expect confidence among financial occupiers, which take up 54 per cent of grade A office space in Hong Kong’s central business district, to be affected by the drop in the Hong Kong stock market from its early 2018 peak, and by rising interest rates.”

Average rents of grade A offices in Central declined by 0.3 per cent to HK$163.7 per sq ft in November from the prior month, according to Knight Frank, reflecting the end of a rising trend that lasted for almost three years.