Grade A office market records positive net absorption in May

HONG KONG, 24 June 2021 – The overall Grade A office market saw positive net absorption of 116,300 sq ft amid plenty of marketable space in May, the first time the market had recorded positive net absorption since July 2019, according to JLL's latest Hong Kong Property Market Monitor released today. Leasing activities in retail and warehouse markets also improved in May.

The real estate reconfiguration trend precipitated by the Covid-19 pandemic continued with more corporate tenants opting to upgrade their office space, especially as rents have corrected to more affordable ranges. For instance, food delivery company Foodpanda reportedly leased two floors with gross floor area of 39,000 sq ft at Times Square in Causeway Bay.

The gross leasing volume in Central has improved in recent months, with the vacancy rate in the submarket retreating from 7.5% to 7.2% as of end-May. Among the more significant leasing transactions, flexible workspace provider -- The Executive Centre reportedly leased a floor with lettable floor area of 15,800 sq ft at AIA Central.

Rents in the overall market declined by 1.4% m-o-m as landlords in general were willing to lower their asking rents to entice new tenants. However, it is noteworthy that a handful of buildings with well managed occupancies have recorded rental growth. Among the major office submarkets, Tsimshatsui experienced the biggest rental decline, whereas rents in Central were relatively more resilient.

Alex Barnes, Head of Agency Leasing at JLL in Hong Kong, said: "Occupiers have started to resume real estate decision making in recent months as business confidence builds in Hong Kong. We believe that the worst period for the office leasing market has passed and rental fall will moderate in the second half of the year for most core markets."

Leasing momentum for retail and warehouse also picked up in May. Nelson Wong, Head of Research at JLL in Greater China, said: " There were a few notable deals recorded in the retail market in May. Total retail sales continued to record growth in April at 12.1% y-o-y. Leasing momentum for warehouse continued to pick up alongside a robust external trade environment."