Office space vacancy hits 20-year low

But demand for Grade-A office space declined forcing rents to slip 3.2%.

According to Jones Lang La Salle's Mid Year Property Review, occupier market continued to expand on aggregate in 1H12 with an overall net take-up of Grade-A office space amounting to 1.1 million sq ft. While the Central submarket contracted, Kowloon East continued to be a popular choice for tenants and remained a key contributor to net take-up for 1H12.

Decentralisation remains a key trend with demand from the banking sector limited and companies seeking cost-saving opportunities through relocation. The overall vacancy level of office space is at a near 20-year low, currently sitting at 3.4%, down from 4.2% at the end of 2011. This is due in part to owner-occupier purchases.

Rents showed resilience across submarkets, with Central the only exception in 1H12. As demand declined, overall Grade-A office rents slipped by 3.2%. Rental pressure was largely restricted to the top-tier buildings in Central, which led to a 7.4% drop in rents in the submarket. Rents outside Central continued to edge up due to continued decentralisation, with Kowloon East registering a 4.7% growth. This was followed by Tsimshatsui, where rents rose by 3.3% in 1H12

Ben Dickinson, Head of Hong Kong Markets at Jones Lang LaSalle Hong Kong said: “The uncertainties in the macroeconomic environment will continue to weigh on leasing demand in 2H12. Demand from the banking sector is expected to remain weak and tenants continue to look for cost-saving solutions. While rents in Central may face further correction, we expect those in other submarkets to remain stable.”