Chart of the Day: Here’s how costly office rentals are in Hong Kong compared with Asian peers

Rental values remain the highest at HKD 58.4 psf pm.

According to Jones Lang LaSalle, uncertainties in the economic outlook continued to weigh on leasing demand in the Grade A office market with net take-up in the overall market slowing to 147,700 sq ft (net) in 3Q12, compared with 697,000 sq ft (net) and 405,100 sq ft (net) achieved in 1Q12 and 2Q12, respectively.

“Leasing activity in the core-area markets was largely driven by smaller requirements for both expansion and new lettings. The lack of cost effective office space in the core-area markets continued to result in tenant decentralisation. Notable tenants opting to decentralise in 3Q12 included The Consulate General of Canada, who relocated their offices from Central to Quarry Bay and AXA, relocating from Wanchai to Kowloon Bay. Surprisingly, the quarter also saw some tenants willingly pay a slight premium to relocate into Tsimshatsui. Ageas Insurance, for instance, will relocate their office from Quarry Bay to World Finance Centre while LiDL will move from Kowloon East to Miramar Tower,” it said.

JLL notes that Grade A office rents in the overall market remained, on average, unchanged in 3Q12 with the slight correction in Central rents being offset by growth in the other office sub-markets.
Capital values, on the other hand, it said, continued to trend higher across the whole market, growing by 1.8% q-o-q in 3Q12.
“Both investors and end-users showed a willingness to accept lower yields, particularly in the non-core area markets. The investment market was highlighted by several multi-floor transactions in Kowloon Commerce Centre Tower 2, a new Grade A office building currently under construction in Kwai Chung. China Shipping purchased four floors for HKD 784.3 million (HKD 7,550 per sq ft, gross) while The Open University of Hong Kong purchased five floors for HKD 757.0 million (HKD 6,090 per sq ft, gross),” it said.