News release

Grade-A office rental drop moderates in November

Overall negative net absorption decreases

December 23, 2020

HONG KONG, 23 December 2020 – The extent of rental decline has abated in recent months, as the initial phase of sharp rental corrections is over, according to JLL’s latest Property Market Monitor released today.

Rents extended the downward trend across all major office submarkets in Hong Kong with the overall market recording a 0.7% m-o-m drop in November. Wanchai / Causeway Bay experienced the most significant contraction in rents during the month, while decentralised submarkets remained relatively resilient.

Overall Grade-A office negative net absorption was 130,500 sq ft in November as contraction among corporate occupiers continued. Nevertheless, some instances of tenant expansion were seen as rents corrected to more affordable ranges. For instance, insurance company FWD reportedly expanded at 14 Taikoo Wan Road in Quarry Bay, leasing 19,300 sq ft (LFA).

The vacancy rate in Central stayed at 6.9%, with a considerable amount of surrender space in addition. Leasing activity mainly revolved around small spaces. Notably, local law firm Tanner De Witt Solicitors reportedly leased a floor at Lippo Centre Tower 1 in Admiralty, taking 9,800 sq ft (GFA).

Alex Barnes, Head of Markets at JLL in Hong Kong, said: “Tenants started to make longer term real estate decisions, which will help the gross leasing volume pick up in 2021. And the rental fall would be moderate. We expect overall Grade A office rents to drop 5-10% next year. However, office rents in Tsimshatsui will under greatest pressure and will drop by 10-15%.”

With respect to the retail market, Nelson Wong, Head of Research at JLL in Greater China, noted: “Leasing demand continued to be driven by retailers targeting at local consumption, in particular Food and Beverage (F&B) operators. For instance, Japanese sushi restaurant Sushiro committed to a new branch at Infinitus Plaza (9,005 sq ft) in Sheung Wan. This is their fifth new branch opened during the year, marking the fast-growing expansion trend for certain F&B operators.”

Grade-A Office Vacancy
Period Overall Central Wanchai/Causeway Bay Hong Kong East Tsimshatsui Kowloon East
End-Nov 20 8.8% 6.9% 7.6% 5.0% 9.1% 14.5%
End-Oct 20 8.6% 6.9% 7.4% 4.6% 8.9% 14.1%

Source: JLL Research

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