Tenants, however, still prefer being as close to the CBD as possible.
Despite being a traditional off-peak season, companies in Hong Kong Island looking for multiple floors ramped up their decentralisation plans in July on the back of staggering rental costs in Central, according to real estate consultant Knight Frank.
This includes law firm Reed Smith Richards Butler which has relocated from Central to take over around 40,000 sq ft at One Taikoo Place in Quarry Bay. Financial services provider ICAP is also exiting Central with a planned relocation from The Center to One Hennesy in Wan Chai.
Co-working space operator SPACES also took over 100,000 sq ft in lee Garden Three in Causeway Bay.
“The speedy taking up of the buildings like the One Hennessy indicates that decentralising tenants still prefer to remain as close to the CBDs as possible,” said Knight Frank.
Overall Central rents extended its steep climb after rising 7.6% in July to around $45,344 psf which roughly translates to a monthly rent of $161.2 psf.
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, making it the world's priciest prime office market for the third consecutive year and far beyond London’s West End at $1,843 (US$235.01) and Beijing’s Finance Street at $1,576 (US$200.91).
In a bid to save costs, companies are also turning to new completions in Kowloon like Hong Kong Pacific Tower and China Shipbuilding Tower in Cheung Sha Wan, CBRE said in an earlier report.
“In Greater Central, at least 178,000 sq. ft will be vacated by tenants planning to move to decentralised areas by the end of 2018,” added CBRE.
Around 4.5m sq ft of new supply is set to be delivered in 2018/19 of which 89% or 4m sq ft will be located in non-core areas.
Photo from User:Geographer, CC BY-SA 3.0
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