These firms recently moved to higher quality offices in Hong Kong

 

According to Knight Frank, the vacancy rate in Hong Kong Island's non-core districts slightly decreased in September as more small and medium-sized businesses sought for affordable office space there. 

For instance, the vacancy rate decreased from 12.5% in August to 11.6% in September in North Point and from 8.2% in August to 7.7% in September in Sheung Wan. 

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The flight to quality trend has remained in the recent downturn as big businesses look for great locations at reasonable rent prices. With a 33,000 square foot deal, American investment manager Invesco moved its regional offices from Champion Tower to Jardine House. 

Other cases of upgrading involved the accounting firm Baker Tilly, which moved from The Foyer to K11 Atelier King's Road with a 20,000 square foot lease, and the LVMH Fashion Group, which relocated from 633 King's Road and leased two floors (28,000 square feet) in Dorset House. 

Given their renowned location and distinctive building features, new buildings in Central like Cheung Kong Centre II and The Henderson, which are now open for pre-leasing, have attracted a tonne of attention from potential tenants. In the short term, landlords in Central will be under pressure to lower rents due to the plentiful supply, therefore we anticipate the rental trend to continue its downward adjustment in Q4 2022. 

Kowloon 

Leasing activity was poor in September as overall business morale remained negative. The demand for new leasing was boosted by electronic and sourcing businesses. The majority of the sales involved tiny properties under 3,000 square feet with rents of HK$22 per square foot or less. 

Due to the increased economic unpredictability, tenants tended to be more careful while choosing a lease. They were more likely to renew their leases at the alluring rent that landlords were offering than to consider moving. So, during the month, renewal cases dominated the market. 

The general business climate has improved since the "0+3" quarantine policy was announced. Even though the border has not yet been fully opened, it is a start, at least to resume some local business travel. Businesses continue to hold out hope for further social distance limitations to be relaxed as well as the elimination of all quarantine regulations. Only then will we observe a more notable uptick in economic activity.