Rents in Office Market Grow at Fastest Pace in More Than Two Years

Tenant demand focused on Hong Kong East and Kowloon East in April, which accounted for 76% of all new lettings, in terms of floor space, during the month. 

May 22, 2018

HONG KONG, May 22, 2018 – Rents in the office market in Hong Kong grew at their fastest pace in more than two years amid a tight vacancy environment and an active leasing market, according to the latest Property Market Monitor released by JLL.

Overall, rents climbed 1.1% m-o-m in April, after advancing a mere 0.2% growth m-o-m in March.

Tenant demand focused on Hong Kong East and Kowloon East in April, which accounted for 76% of all new lettings, in terms of floor space, during the month. Rents in the two submarkets advanced by 3.1% m-o-m and 1.2% m-o-m, respectively. The largest deal reported in April involved DBS leasing seven floors (138,000 sq. ft.) at Two Harbour Square in Kwun Tong as it moved to consolidate its back office operations out of Millennium City 6 and One Island East.

In Central, leasing demand was underpinned by expansion requirements from the banking and professional services sectors. PRC corporates continued to be a key driver of demand, accounting for 53% of new lettings in Central in April, including Guotai Junan reportedly leasing 10,100 sq. ft. at Man Yee Building.

Net absorption in the overall market amounted to 634,200 sq. ft in April. This was buttressed by the realisation of pre-commitments at Mapletree Bay Point in Kwun Tong, which received its occupation permit during the month.

Denis Ma, Head of Research at JLL, adds: "The latest statistics announced by the government show Hong Kong's unemployment rate at a 20-year record low. Coupled with the city's buoyant economic climate, we expect leasing demand for office space and rentals to continue to grow in the months ahead. As a result, we've revised our forecast upwards and now expect Grade A office rents to advance in the range of 5-10% in 2018."

Adrian Tang, Head of Kowloon Markets at JLL, says: "While the leasing market has been performing well, it is interesting to note that the investment market for offices has also reached new heights. With the sales of whole floors in the high zone at Far East Finance Centre and 9 Queen's Road Central striking HK$660.0 million and HK$514.2 million, respectively, strata-titled office transactions have surpassed the HK$60,000 per sq. ft. mark for the very first time."

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