Half year office net absorption rate of 1.5m sqft smashes 2017 full-year record

Sustained leasing demand from Chinese financial firms buoyed half-year figures.

Hong Kong’s Grade A office market posted its strongest performance in three years after half year net absorption rate of 1.5m sqft already beat that of 2017’s full year record of 1.2m sqft, according to real estate consultant CBRE. 

Chinese financial firms seeking expansion drove half-year leasing demand with new leases rising from 408,000 sqft in H1 2017 to 509,000 sqft in H1 2018. Overall Grade A office vacancy rates also tightened from 4.4% in April to 4.3% in May.

“Most of the new buildings, such as One Taikoo Place, South Island Place and One Hennessy, have already achieved a strong pre-leasing rate,” said Alan Lok, executive director, advisory & transaction services - office, CBRE Hong Kong.

Sustained leasing demand from Chinese firms in Central are also poised to keep the impact of decentralisation, which hit 361,000 sqft in H1, to a minimum as they continue to plug up backfill returned space, Lok added.

This comes despite the fact that prime office occupancy costs, which include rent, local taxes and service charge, in Central clock in at a whopping $2,405 (US$306.57) per sqft annually as of Q1, far beyond London’s West End at $1,843 (US$235.01) and Beijing’s Finance Street at $1,576 (US$200.91).

Also read: Central is the world's priciest prime office market for the third straight year

Co-working operators are also steadily snapping up office space after committing to another 339,000 sqft. in the first half of the year, with operators originating from China accounting for 170,000 sqft.

Also read: Flexible working spaces in Hong Kong doubled in past three years

The footprint of co-working centers was 1.1m sq. ft. in 2017 and is estimated to surge to 1.6m sq. ft. by end of 2018, CBRE added.