Office rents fell for the first time in 5 years
Due to Sino-US trade frictions and the unstable political environment in Hong Kong, the Hong Kong office and retail leasing market performed poorly in the second quarter. In the last quarter, office rents in Hong Kong fell by 0.4% quarter-to-quarter. The year-to-date decrease of 0.2% was affected by the uncertainty in the external and the decline in the rental of Grade A office space in the core area, and the decrease in the rent of Grade A office buildings in Wan Chai/Causeway Bay and Central District. The average rent of office buildings in Hong Kong fell during the quarter, the first time since 2014.
DTZ is expected to maintain zero growth or down to 2% for office rents this year. The rent in the core area of Hong Kong Island will fall. Xiao Lianghui, managing director of DTZ, said that the weak leasing demand of Chinese-funded enterprises and the increasing emphasis on cost control by multinational companies under the influence of Sino-US trade friction have led to a gradual decline in the overall absorption of office buildings in Hong Kong in the first half of last year. 1.05 million square feet, down to 868,000 square feet in the second half of last year
Weak demand from Chinese companies
As regards office rents, the overall average rent in Hong Kong fell for the first time in five years. Rents in the traditional core areas, including the Central Grade A Grade A office and Wan Chai/Causeway Bay, fell by 1.2% and 2.0% respectively, while those in the Central District fell slightly by 0.7%. DTZ expects rents in the above three regions to be lowered by 1% to 4%, reflecting the peak rent in the core area. However, rents in other regions have increased slightly. Among them, Hong Kong Island has the largest increase of 1.4%. It is the largest increase among Hong Kong Island East, Hong Kong Island South and Tsim Sha Tsui. At the same time, insurance companies have moved out of the core business district.
Xiao Lianghui expects that the overall market performance will remain quiet in the second half of this year, but the business volume of some retail products such as cosmetics, personal care products and sports and leisure products is expected to be maintained.