Grade A office leasing demand swells slightly in Q3 2016

Net absorption is back in the green.

Leasing demand in the Hong Kong Grade A office market improved in Q3 2016 as net absorption returned to positive territory, rising to 96,800 sq. ft. from -334,900 sq. ft. in the previous quarter.

According to a research note from CBRE, year-to-date (YTD) net absorption stood at 159,000 sq. ft., less than 10% of the 2.5 million sq. ft. registered for the whole of 2015.

Low vacancy in core submarkets continued to limit occupier choice, meaning the bulk of leasing transactions involved shadow space and future vacant space, and were therefore not included in calculations of net absorption.

Overall vacancy edged down 0.1 percentage points to 4.4%.

Here's more from CBRE:

The period also saw some expansionary demand from mainland Chinese financial firms, predominantly in Central, and insurance companies, mainly in Kowloon and the New Territories. However, cost-saving requirements continued to drive the leasing market.

Rents on Hong Kong Island remained resilient, edging up 1.0% q-o-q. Rising vacancy pressure ensured rents in Kowloon edged down in Q3. Overall Hong Kong rents climbed a further 0.7% q-o-q, bringing YTD rental growth to 3.7%.