Hong Kong's Central Office Vacancy Rate Hits 16 Year High in 2020

Office vacancy surpasses 7 percent, the first time since 2004

According to JLL's latest Hong Kong Property Market Monitor report, Grade A office vacancies rate for Hong Kong's Central Market rose to 7.3% in December 2020, surpassing 7% for the first time since 2004.

The vacancy rate will continue to increase as there is a sizable amount of marketable and surrender space anticipated to come back to the market in the upcoming months. Leasing activity was limited towards the end of the year, with only a handful of small transactions recorded.

Overall, Grade A office net absorption was -175,600 sq ft last month due to the ongoing occupier downsizing trend driven by the economic recession. For instance, Lane Crawford vacated 19,400 sq ft (GFA) at One Island South in Wong Chuk Hang, while FTLife Insurance released a floor (16,500 sq ft, GFA) at FTLife Tower in Kowloon Bay. Moreover, DHL reportedly leased 90,900 sq ft (GFA) at International Trade Tower in Kwun Tong, downsizing and relocating from Kowloon Bay.

Alex Barnes, Head of Office Leasing Advisory at JLL in Hong Kong, said: "The rental decline trajectory continued across all major office submarkets, with net effective rents in the overall market dropping 1.1% m-o-m in December. Tsimshatsui experienced the most significant contraction in rents during the month. Its rents dropped 1.7% m-o-m, while those in decentralised submarkets remained relatively resilient."

In the retail market, Nelson Wong, Head of Research at JLL in Greater China, said: "As high street shops rents retreated to almost 2003 level, the market saw some high-end retailers committed new stores in core shopping areas. Meanwhile, a number of vacant shops were filled by retailers focusing on domestic demand. The improving leasing momentum has helped to ease the vacancy pressure marginally in high streets."