Office space demand ‘evolving’ as corporates focus more on sustainable offices: JLL

Despite increasing demand, vacancy still rose to 12.4% as of end-May.

The office market sentiment improved in May with more leasing enquiries for Grade A office space, according to JLL.

“Demand for office space is evolving as corporates are increasingly focused on a sustainable and healthy office environment in the post-pandemic era,” the expert commented.

“From 2H22 to end-May 2023, JLL said 52.8% of the sizable new lettings and expansions (>15,000 sq ft, landlord-quoted area) involved commitments in green buildings, more than the previous years,” JLL added.

Despite rising demand, the vacancy rate still rose in May, reaching 12.4% and the market still recorded a negative net absorption of 165,000 sq ft. JLL, however, underscored that the negative absorption was due to “the return of some sizable spaces to the market during the month.”

The expert added that rental gaps among submarkets, especially between core submarkets and decentralised areas, have already narrowed.

“Tenants are viewing it as an opportunity to upgrade office spaces,” JLL said.

JLL also observed a decline in vacancy rates in some submarkets like Wanchai / Causeway Bay and Hong Kong East where vacancy both dropped 0.2 percentage points. 

Wanchai / Causeway Bay and Hong Kong East also saw a drop in net effective rent, with rents stopping by 0.5% and 1.3%, respectively.

Overall, net effective rent edged down by 0.3% m-o-m in May.