Office vacancy rates tighten to 4.3% in May

Co-working operators from the Mainland continued to snap up office space.

Overall Grade A office vacancy rates tightened from 4.4% in April to 4.3% in May, according to real estate consultant JLL, as decentralisation gains momentum and co-working operators from the Mainland continue to set up shop.

Vacancy rates in highly sought after Central district further tightened from 1.5% to 1.4% in May even as a number of companies are turning elsewhere like Quarry Bay for their expansion needs. In fact, two law firms leased a combined 36,400 sqft at One Taikoo Place whilst Shanghai Pudong Bank leased eight floors at One Hennessy as part of its expansion plans. 

Also read: Hong Kong East and Kowloon dethrone Central in April as tenants embrace lower rents

Vacancy rates fell across the board for Hong Kong East,Tsimshatsui and Kowloon East at 2.3%, 1.6% and 10.2%. However, there were slight greater number of unoccupied offices in Wanchai/Causeway Bay as vacancy rates inched up from 2% in April to 2.3% in May.

“Competition persists from tenants seeking quality space across the Hong Kong Island office market. There is such strong demand for large space on Hong Kong Island that landlords are trying to create opportunities against existing expiries,” said Alex Barnes, head of markets at JLL.

Co-working operators also continued their entry into the thriving office market with Beijing-based KR Space leasing seven floors at One Hennessy in Wan Chai for its first Hong Kong centre. KR Space joins other Mainland-based flexible workspace operators Ucommune and ATLAS in their Hong Kong foray.

Also read: Flexible workspace represent 1.2% of Hong Kong's office space

“Coupled with sustained demand from PRC corporates in the top-end of the market, tenants are likely to face an increasingly tight market moving forward,” said Denis Ma, head of research at JLL.

Photo from Baycrest - Own work, CC BY-SA 2.5