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News Release

HONG KONG AND MACAU

Overall Grade A office vacancy drops to the lowest level since 2000

Investors shift their interest to Central as rents recover


HONG KONG AND MACAU, 17 November 2015 – On the back of limited new office supply and robust demand, the overall Grade A office vacancy rate dropped to 2.8% in October, the lowest level since 2000, according to JLL’s Hong Kong Property Market Monitor​ research report published this November.

Net take-up for the overall office market amounted to 289,900 sq ft in October, up significantly from September’s 184,000 sq ft.  Growth was largely driven by pre-sales at 3 On Kwan Street in Shek Mun by Billion Development.  Over 95% of the 161,000-sq ft building was pre-sold.  Wanchai/Causeway Bay and Kowloon East were also buoyant, where net take-up amounted to 36,500 sq ft and 58,200 sq ft respectively. Central recorded a net withdrawal, albeit marginal, for the first time in 2015 with a handful of sizable lease expiries returning space to the market.  

Denis Ma, Head of Research, Hong Kong at JLL, said, “In Central, rentals grew by 1.1% m-o-m in October, led by the growth of the top-end market.  The low vacancy environment means that leasing demand was dominated by smaller office requirements, including those from the hedge funds and private equity firms.”

“Rents in Kowloon East remained largely unchanged despite robust leasing demand.  Most landlords adopted a cautious attitude in raising rents, in view of the stiff competition posed by new supply in both the office and industrial property markets,” Ma added.

Despite a number of new buildings—currently under construction—being marketed in the sales market, investment activity in Kowloon East remained quiet as investors shifted their interest to Central where rentals have rebounded.  Billion Development, a developer that has historically focused on building for the strata-titled sales market switched gears during the month, making available unsold units in some of their newly completed office buildings to the leasing market.  For example, in Montery Plaza in Kwun Tong, 18,500 sq ft of office space was leased to The Church of God in Hong Kong.

In the government land sales market, a business site with a maximum buildable GFA of 173,800 sq ft in Shek Mun (STTL 617) was awarded to Sun Hung Kai Properties for a total consideration of HK$675.5 million.  The winning bid fell within the range of market expectations but the A.V. of HK$3,886 per sq ft was still about double the amount paid by Billion Development for adjacent business development sites in late 2011.

Grade A Office Vacancy Rates 
PeriodOverallCentral

Wanchai /

Causeway Bay

Hong Kong EastTsimshatsuiKowloon East
End October2.8%1.2%1.9%0.7%1.5%5.7%
End-September3.0%1.2%2.1%0.7%1.6%6.1%
Source: Research, JLL