Hong Kong Island prime office rents slip 0.7% in H1

But overall rents in Central and Admiralty inched up 0.4%.

Overall Grade A office rents on Hong Kong Island recorded a slight drop of 0.7% in 1H22, according to a report by Knight Frank. 

However, supported by growing leasing demand in core areas, overall monthly rents in Central and Admiralty registered a growth rate of 0.4% in both areas in 1H22, standing at HK$114.7 and HK$73.9, respectively, per sq ft in June. The office upgrade trend, driven particularly by MNCs, continued in Central. 

Here’s more from Knight Frank:

Recently, U.S. investment firm Millennium Capital Management expanded its office space, leasing an additional 8,700 sq ft in Two IFC, while a foreign PE fund upgraded its office to 7,500 sq ft. in Two IFC. 

Apart from the strong rivalry among office buildings to retain tenants, competition between landlords and co-working service providers is also fierce. Unlike traditional leasing contracts, landlords are now more willing to offer flexible lease terms and provide fully fitted space for tenants. With the downward adjusted rent, more tenants are reconsidering the traditional office options. For example, Canadian corporation PSP Investment moved from a serviced office in Prosperity Tower to Two IFC, leasing 4,500 sq ft. 

Compared with the pre-covid period, the current rents on Hong Kong Island, especially in sought-after buildings in Central, are more affordable, fueling the recentralisation trend. We expect demand for prime locations to continue to grow and support overall leasing momentum, driving moderate rental growth in 2H22.