Larger occupiers eyeing opportunities in HK East
A tight vacancy environment and rising rents continues to drive larger occupiers to seek office space beyond Central into other submarkets on Hong Kong Island.
HONG KONG, March 19, 2017 – A tight vacancy environment and rising rents continues to drive larger occupiers to seek office space beyond Central into other submarkets on Hong Kong Island, including Hong Kong East. As a result, rents in Hong Kong East recorded the strongest growth among the city's major office submarkets in February, according to JLL's Property Market Monitor released today.
Among the more noteable new lettings, Kering pre-leased two whole floors (37,300 sq ft) at One Taikoo Place in Quarry Bay as part of their consolidation out of offices in Causeway Bay. RGA Reinsurance, meanwhile, relocated within Swire Properties' Island East portfolio, leasing 26,000 sq ft at Dorset House to accommodate expansion plans.
Average rent in Hong Kong East climbed 0.3% m-o-m to HKD 49.9 per sq ft in February, underpinned by 0.5% m-o-m growth in Grade A1 office rents in Quarry Bay. The rental growth was the highest amongst the office submarkets amid rents in overall market advancing 0.1% m-o-m, their lowest pace in 12 months.
Net absorption in Central amounted to 62,400 sq ft as several tenants sought room for expansion. The Executive Centre, a serviced office operator, reportedly leased two whole floors (29,700 sq ft) at Three Garden Road for a new location in Central.
Alex Barnes, Head of Markets at JLL, said: "With vacancy dropping to 1.4%, occupiers with larger requirements have little option but to look beyond Central. At present, that search continues to be largely focused on Hong Kong Island with few occupiers from Central willing to take the plunge to relocate across the harbor. As vacancy on Hong Kong Island further tightens and rent grows as a result, this situation will change."
Denis Ma, Head of Research at JLL, said: "Limited availability in Central and strong tenant interest in recently completed and upcoming new buildings on Hong Kong Island is likely to continue to support rental growth over the coming months. If sustained, any risks on our current rental forecasts for 2018 will be on the upside. Our current forecast is for rents in grow in the range of 0-5% for most Grade A office submarkets in 2018."
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