Larger office tenants eyeing opportunities in Hong Kong East
According to JLL’s Property Market Monitor released this week, a tight vacancy environment and rising rents continues to drive larger occupiers to seek office space beyond Central into other submarkets on Hong Kong Island, including Hong Kong East. As a result, rents in Hong Kong East recorded the strongest growth among the city’s major office submarkets in February 2018.
Among the more notable new lettings, Kering pre-leased two whole floors (37,300 sq. ft) at One Taikoo Place in Quarry Bay as part of their consolidation out of offices in Causeway Bay. RGA Reinsurance, meanwhile, relocated within Swire Properties’ Island East portfolio, leasing 26,000 sq. ft at Dorset House to accommodate expansion plans.
Average rent in Hong Kong East climbed 0.3% m-o-m to HKD 49.9 per sq. ft in February, underpinned by 0.5% m-o-m growth in Grade A1 office rents in Quarry Bay. The rental growth was the highest amongst the office submarkets amid rents in overall market advancing 0.1% m-o-m, their lowest pace in 12 months.
Net absorption in Central amounted to 62,400 sq. ft as several tenants sought room for expansion. The Executive Centre, a serviced office operator, reportedly leased two whole floors (29,700 sq. ft) at Three Garden Road for a new location in Central.
Alex Barnes, Head of Markets at JLL said, “With vacancy dropping to 1.4%, occupiers with larger requirements have little option but to look beyond Central. At present, that search continues to be largely focused on Hong Kong Island with few occupiers from Central willing to take the plunge to relocate across the harbor. As vacancy on Hong Kong Island further tightens and rent grows as a result, this situation will change.”
“Limited availability in Central and strong tenant interest in recently completed and upcoming new buildings on Hong Kong Island is likely to continue to support rental growth over the coming months. If sustained, any risks on our current rental forecasts for 2018 will be on the upside. Our current forecast is for rents in grow in the range of 0-5% for most Grade A office submarkets in 2018”, commented Denis Ma, Head of Research at JLL.