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According to the latest real estate survey released by JLL this week, the drop in the office rental market in Hong Kong has eased in recent months as the initial phase of the sharp rent adjustment has ended.
Rents expanded the downward trend across all major office submarkets in Hong Kong, with the overall market falling 0.7% MoM in November 2020. Wanchai / Causeway Bay experienced the most significant rents declines during the month. while decentralized submarkets have remained relatively resilient.
The total negative net takeover of Class A offices was 130,500 sq. Ft in November as the decline in corporate tenants continued. However, some tenant expansions were seen as adjustments to rent to a more affordable range. For example, insurance company FWD reportedly expanded its operations at 14 Taikoo Wan Road in Quarry Bay, leasing 19,300 sq. Feet (LFA).
The vacancy rate in Tsentralny remained at 6.9%, with the addition of a significant amount of leased space. Leasing activities were mainly related to small areas. Notably, local law firm Tanner De Witt Solicitors reportedly leased a floor in Lippo Center Tower 1 in the Admiralty, occupying 9,800 sq. Feet (GFA).
Alex Barnes, Head of Markets at JLL in Hong Kong, said: “Tenants have begun to make longer-term property decisions, which will help increase total leases in 2021. And the drop in rents will be moderate. We expect that overall class A office rents will fall by 5-10% next year. However, rents for offices in Tsimshatsui will be under the greatest pressure and will fall by 10-15%.
On the retail side, Nelson Wong, Head of Research at JLL Greater China, also noted: “Leasing demand continued to be driven by local consumer-focused retailers such as food and beverage (F&B) operators. For example, Japanese sushi restaurant Sushiro has opened a new branch at Infinitus Plaza (9,005 sq. Ft.) In Sheung Wan. This is their fifth new branch to open during the year, reflecting a rapidly growing expansion trend for some F&B operators. "