Office vacancy rate in Hong Kong Central stable at 7.2% in March

 

According to a recent Knight Frank research, leasing momentum on Hong Kong Island resumed in March despite the pandemic situation stabilising, with the strong activity level being primarily sustained by modest transactions of less than 6,000 square feet. 

The best-performing industries, including finance and law, kept growing in Central. For instance, the law firm Kobre & Kim and the investment business Invesco each leased 9,000 square feet in Champion Tower and 31,000 square feet in Jardine House, respectively. 

More from Knight Frank is provided here:

At the end of March, a few Grade-A office buildings in Central still had double-digit vacancy rates, but overall, Central's vacancy rate remained stable at 7.2%, outperforming non-CBD areas Admiralty and Wan Chai, which had vacancy rates of 8.4% and 11.2%, respectively. 

Given that demand for certain buildings, like the Standard Chartered Bank Building and AIA Central, swiftly increased, some landlords' initiatives, such as providing flexible lease terms or fit-out options, have proven to be alluring to potential tenants. These landlords began to increase their rents as a result of the increased demand. Given the steadily improving epidemic scenario, we anticipate further momentum in the CBD region over the ensuing months. 

Kowloon

With more tenants starting to make their postponed real estate decisions after a slow return to work, activity levels in March recovered. With an average rent of about HK$22 per square foot, the majority of the transactions were in the manufacturing and sourcing sectors, mostly in the Kowloon East and Yau Tsim Mong districts.

Large new letting transactions helped to fuel the leasing market's brisk activity as tenants seized the chance to consolidate their numerous offices and migrate to new buildings at a reasonable price. 

For instance, the statutory Mandatory Provident Fund Schemes Authority (MPFA) pre-leased 95,000 square feet in the 98 How Ming Street project for a face rent of HK$23.5 per square foot after consolidating its operations in Kowloon Commerce Centre and Millennium City 1. A consolidation effort was also completed by Hong Kong-based phone case manufacturer Casetify, which relocated its offices from Fun Tower and Linkchart Centre to NEO at a face rate of HK$22.5 per sq ft for a 63,000 sq ft area. 

We anticipate that general business sentiment will improve and the lease volume will gradually recover to the level before the fifth wave of the epidemic as more enterprises are permitted to reopen amid the reduced social-distancing measures. By the end of 2022, the market will have seen an overall gain of 1-3%. We anticipate rents in Kowloon to continue their bottoming-out pattern in the ensuing quarters and to creep up modestly.