Hong Kong East and Kowloon dethrone Central in April as tenants embrace lower rents

The two markets accounted for over three quarters of new office lettings last month.

Hong Kong East and Kowloon East are steadily chipping away at the dominance held by traditional business district Central as they accounted for 76% of all new office lettings in terms of floor space in April, according to a report from real estate consultant JLL.

Also read: Companies exit Central in droves amidst staggering rental costs

Rents in the two submarkets rose 3.1% and 1.2% respectively on a month-on-month basis as overall vacancy levels continue to tighten from 4.6% in March to 4.4% in April.

Singapore banking giant DBS was the latest to jump on the decentralisation trend after it leased seven floors worth 138,000 sq ft at Two Harbour Square in Kwun Tong as it consolidates its back office operations out of Millennium City 6 and One Island East.

“Coupled with the city’s buoyant economic climate, we expect leasing demand for office space and rentals to continue to grow in the months ahead. As a result, we’ve revised our forecast upwards and now expect Grade A office rents to advance in the range of 5-10% in 2018,” said Denis Ma, head of research at JLL.

Even with its dominance being challenged by emerging office districts, strong expansion demand from the banking and professional services sector buoyed leasing activity in Central, with Guotai Junan reportedly leasing 10,100 sq ft at Man Yee Building.

Net absorption in the overall office market hit 634,200 square feet amidst the realisation of pre-commitments at Mapletree Bay Point in Kwun Tong which received its occupation permit during the month.