According to JLL’s latest August 2018 Property Market Monitor released this week, office rents in Hong Kong’s Wanchai/Causeway Bay areas rose by 1.5% month-over-month in July 2018, their fastest pace in three years. The relatively strong growth in the submarket was underpinned by an extremely tight vacancy environment, which dropped to a record low of 1.6% last month.
Against this backdrop, the average monthly rent of Grade A offices in Wanchai/Causeway Bay rose to HKD 68.7 per sq. ft in July. Monthly rents in Tsimshatsui grew by 1.0% month-over-month to HKD 51.5 per sq. ft, led by a 1.3% m-o-m increase in the office buildings along Canton Road. Rents in the overall market continued to rise, up 0.8% month-over-month.
New lettings in Central surged 109% m-o-m on the back of expansion requirements from banks and financial firms. Among the more notable, Oriental Patron leased 13,900 sq. ft at One Exchange Square while Hong Kong Exchange and Clearing leased 13,000 sq. ft at Two Exchange Square; both expanding in-house.
Alex Barnes, Head of Markets at JLL reports, “Leasing activity outside of Central remained active last month. Tenant decentralization supported leasing demand and contributed to net take-up amounting to 250,700 sq. ft in July. With space at a premium in Central, tenants are shifting to new office buildings in Wong Chuk Hang and Quarry Bay. This has been a very active summer, with tenant demand fueled in part by the change of ownership in The Center and redevelopment of Hutchison House.”
Denis Ma, Head of Research at JLL commented, “Hong Kong’s property market continues to charge forward despite the escalating trade war between the US and China. For commercial property, demand for office space from both tenants and investors remains strong while the recovery of the retail sector remains largely intact with retail sales recording growth for the fifth consecutive month in July. In the residential sector, buyers remain upbeat despite the heightened uncertainty around the economy’s outlook. In the warehouse sector, which is likely to be most affected by the trade war, demand remains firm with a number of 3PLs expanding their operations in July. All-in-all, we believe that Hong Kong’s property market will likely stand tall this year though growth may ease slightly in the second half”.