This contraction marks the fourth consecutive quarter of decline with average vacancy rate hitting nearly 6%.
A study by Savills has revealed that grade A office rents have contracted by 3.8% YoY in Q2. Overall office rents also took a dive by 11% YoY over the same period. Meanwhile, the average vacancy rate hit nearly 6%. The vacancy rate in core areas, such as Central, Wanchai/Causeway Bay, and Tsim Sha Tsui, has more than doubled year-on-year.
Firms are seen moving out of the CBD and relocating to other business districts despite high capital expenditure costs. Major coworking operators and flexible space operators are surrendering or downsizing their locations due to waning demand.
Savills expects that as the rental difference between central and other business districts has reduced to late-2017 levels, it will deter more businesses from moving away from the CBD.
Whilst many businesses are trimming down their spaces, companies like IWG and PRC tech firms and financial institutions, such as Alibaba, ByteDance, CMB International, Orient Finance, and Minsheng Bank, are expanding their office spaces in the central area, the study added.
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