Hong Kong's Steep Office Rental Decline Moderates in November

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According to JLL's latest Property Market Monitor released this week, Hong Kong's office market rental decline has abated in recent months, as the initial phase of sharp rental corrections is over.

Rents extended the downward trend across all major office submarkets in Hong Kong with the overall market recording a 0.7% m-o-m drop in November 2020. Wanchai / Causeway Bay experienced the most significant contraction in rents during the month, while decentralized submarkets remained relatively resilient.

Overall Grade-A office negative net absorption was 130,500 sq. ft in November as contraction among corporate occupiers continued. Nevertheless, some instances of tenant expansion were seen as rents corrected to more affordable ranges. For instance, insurance company FWD reportedly expanded at 14 Taikoo Wan Road in Quarry Bay, leasing 19,300 sq. ft (LFA).

The vacancy rate in Central stayed at 6.9%, with a considerable amount of surrender space in addition. Leasing activity mainly revolved around small spaces. Notably, local law firm Tanner De Witt Solicitors reportedly leased a floor at Lippo Centre Tower 1 in Admiralty, taking 9,800 sq. ft (GFA).

Alex Barnes, Head of Markets at JLL in Hong Kong said, "Tenants started to make longer term real estate decisions, which will help the gross leasing volume pick up in 2021. And the rental fall would be moderate. We expect overall Grade A office rents to drop 5-10% next year. However, office rents in Tsimshatsui will under greatest pressure and will drop by 10-15%."