Hong Kong office take up records first positive quarter since 2018
Quarterly net-take up in the CBD rebounded to 6,350 sqm in Q2, the first positive quarter since Q2 2018.
Whilst cost-saving remained the main theme for occupiers as some MNCs continued to downsize, Colliers says the office market also witnessed more flight-to-quality and recentralisation moves.
Leasing activities started to pick up in the CBD, with Central / Admiralty leading the way with quarterly net-take up rebounding to +68,300 sq ft NFA (6,350 sq m), the first positive quarter since Q2 2018, according to Colliers. Some mainland firms and financial companies chose this submarket due to the availability of more affordable options.
Here’s more from Colliers:
The quarter started to witness a rental rebound in prime buildings and premium landlords’ portfolios. However, offices with subpar building quality or management services continue to face greater vacancy and rental pressure.
The rental drop further narrowed in Q2 2021, with the overall market and CBD rents decreased by -1.6% QOQ and -1.0% QOQ, respectively, compared to the -2.0% QOQ and -1.6% QOQ drop in Q1. However, Kowloon East witnessed a more notable decline by -4.6% QOQ, as there are over 2.2 million sq ft (211,000 sq m) of vacant office space available for lease in the subdistrict as of Q2 2021.
We expect to see leasing momentum to further pick-up towards the end of 2021, with mainland finance occupiers leading the way in seeking high-quality Grade A office space around core locations. The Wealth Management Connect, a recent mainland-Hong Kong cross border finance initiative, will likely bring new letting demand from mainland banks and financial firms.
The improving vaccination progress, coupled with the gradual relaxation of social distancing rules should further support business sentiment and inspection activities in H2 2021.
In 2021, we forecast both overall rents and CBD rents to fall by -6% YOY, with a gradually slower pace of rental correction in H2 2021. We recommend landlords upgrade their building facilities provision and management service to keep up occupancy. We believe tenant retention will likely be the key priority for landlords in H2 2021 as the leasing market remains competitive amid abundant options.