Third quarter rent dropped by 1%

According to the Savills report, Hong Kong Grade A office rents fell by 1.0% in the third quarter, and the vacancy rate remained below the 5% warning line

Savills released its third-quarter office leasing report. Hong Kong’s Grade A office rents ended seven consecutive quarters of growth, with overall rents falling by 1.0% during the quarter and vacancy rates at a low of 3.8%. Except for the rent in West Kowloon, which was flat with the previous quarter, the rest of the region recorded different degrees of decline.

The bank said that although some multinational companies are considering moving to other parts of the Asia-Pacific region, Chinese companies still choose to stay in Hong Kong. In the next five years, new supply will be concentrated in the east and non-core areas of Kowloon, and Central will usher in a large number of new buildings in 2023.

Wan Chai and Causeway Bay have the largest declines

Since the launch of the Shanghai-Hong Kong Stock Connect in the third quarter of 2014, the rent of Hong Kong’s Jiasha has been growing year after year, and the decline is the first time. Hong Kong Island saw the largest decline in Wanchai/Causeway Bay (-1.6%), followed by Central (-1.3%, the first decline since the third quarter of 2014) and the Eastern District (-1.1%, the first decline since 2014). The decline was relatively minor in Kowloon (Tsim Sha Tsui: -0.8%; Kowloon East: -0.2%; Kowloon West: unchanged).

In view of the tense trade tensions and social unrest in China and the United States, only sporadic new lease transactions were recorded in the third quarter. The performance of the two major companies in Hong Kong, Chinese-funded enterprises and shared office tenants were not active.

In the next 5 years, Jiasha will supply 9.3 million baht

On the supply side, the bank expects the total supply of Grade A office space in Hong Kong to be approximately 9.3 million square feet (ie, an annual growth of approximately 1.86 million square feet) during the five-year period from 2019 to 2023. Kowloon East is the main supplier of new supply, providing 3.7 million square feet of floor space, accounting for 39% of the total supply; followed by Kowloon West (net supply of 1.5 million square feet, accounting for 16%) and Hong Kong Island East (net supply) 1.2 million square feet, accounting for 13%).

The new area of ​​the new building in Central is only 1 million square feet (19.3% of the total), and the Central Wong Kee Building, the Murray Road Development Project and the Peel Street/Graham Street Development Site Site C will be completed in 2023. It is estimated that Hong Kong’s annual absorption during the five-year period will be about 1.1 million square feet.

Sheng Shimin, head of Hong Kong Research and Consultancy Department of Savills Davis, said that the company was hit by Sino-US trade tensions and recent social turmoil, but the overall vacancy rate of Jiasha was less than 5%, and rents remained relatively firm. If the current situation continues until next year, the rent will fall even more.

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