Annual overall rents declined by 17.4% YoY in 2020.
Office leasing momentum weakened in Q4 2020, following the reintroduction of measures to contain the fourth wave of local COVID-19 infections, according to a report by commercial real estate services company CBRE.
According to its report, overall rents declined by 4% QoQ in Q4 2020, bringing the annual decline to -17.4% YoY in 2020. Rents in Wan Chai/Causeway Bay fell the most across the major submarkets, leaving a 20.1% full-year decline. Hong Kong East was the best performing submarket, with rents falling by a 8.3%.
Full-year net absorption registered a negative 2.2 million sq. ft., the largest decline on record.
Overall vacancy continued to climb to 9.9%, the highest since Q2 of 2009, with the underlying 8 million sq. ft. of vacant space as of end-2020, the highest since December 1999.
CBRE forecasts that multinational corporations will remain cost-cautious as expansion demand will likely be thin in 2021.
High availability of vacant space will ensure further rental pressure across submarkets. CBRE expects Grade A office rents to decline by another 5% across major submarkets in 2021.
Moreover, pent-up demand from recent initial public offerings will likely translate into improving leasing momentum in H2 2021. Chinese corporates are expected to become more active this year, provided the pandemic is brought under control and travel restrictions are removed.
“The first half of 2021 will likely see office rents trend down further as high vacancy continues to struggle landlords amidst limited new and expansion demand. The market should see a pick-up in leasing demand from Chinese firms as fund raising activity continues to flourish. A full resumption of cross-border people flow, however, is crucial to support a rally in such leasing activities,” CBRE Hong Kong executive director Alan Lok said.
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