Decentralisation also slowed due to a low availability of spaces over 20,000 sqft.
Hong Kong’s Grade-A office leasing market in Central was quiet over April, mainly as a consequence of limited available stock, a monthly report by Knight Frank revealed. As a result, the overall Central rent remained flat at $161 psf.
According to Knight Frank Greater China’s director and head of research and consultancy David Ji, landlords are standing firm on asking rents and more selective of tenants amidst a low vacancy environment.
“Many mainland companies are no longer in expansion mode or have pulled back from the Hong Kong market in the past few months. With no new drivers in the market, the leasing momentum in Central remains weak,” he noted.
At the same time, a substantial amount of new stock will be available in the next 12 months due to some larger tenants moving out of Central. Ji expects the vacancy rate to increase from the present low level of 1.7%.
Meanwhile, decentralisation to Quarry Bay has slowed due to the low availability of large space of over 20,000 sqft in Island East, whilst relocations to Wanchai from Central district remained strong as law firms, in particular, prefer the proximity to the District Court in Wanchai, in addition to the lower rent.
“A recent example is Bird & Bird, a UK legal firm, which leased 26,000 sqft in Central Plaza,” Ji highlighted.
Knight Frank’s report further noted that the number of leasing transactions in Kowloon’s Grade-A market fell over 40% MoM in April, owing mainly to the Easter holidays. That said, an estimated 40% of the transactions on the Kowloon side were recorded in Kowloon East driven by demand from the construction and insurance industries.
One significant transaction recorded during the month was Gammon Construction’s letting of a 50,000-sqft office space at The Quayside in Kwun Tong for a monthly rent of $32.5 per sqft. The company will relocate its current office in Devon House, Taikoo Place in Quarry Bay to Kowloon East.
“Looking ahead, we expect rents in Kowloon East to increase only mildly from 0% to 2% in 2019, as over 2.6 million sqft of new supply will be added to the market. Tsim Sha Tsui is expected to experience stable growth, which should underpin an overall rental increase of 1% to 3% in Kowloon,” Ji noted.
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