,Hong Kong

Prime office buildings to lead rental recovery in Hong Kong’s CBD

Rents of Grade A1 offices in the area grew 3% from May-July 2021. 

Hong Kong witnessed a decentralisation trend as occupiers seek other locations due to the high rents and limited availability in the CBD. However, Colliers notes that since H2 of 2018, Hong Kong’s Grade A office market has started to enter a correction phase as US-China trade tensions, social unrest and the COVID-19 pandemic gradually unfolded. Office space availability has consequently been increasing across different submarkets, including the CBD area. CBD rents have become more attractive and affordable, which were down by 26% from its last peak in March 2018. 

“Lower Grade A office rents have narrowed the rental gap between the CBD area and other submarkets. Coupled with the new office supply around Central in the next three years, there should be more recentralisation and flight-for-quality options within the CBD area for occupiers,” said Rosanna Tang, Head of Research, Hong Kong & Greater Bay Area.  

Here’s more from Colliers: 

We expect to see a more pronounced divergence in rental and occupancy performance between prime and less-performing office buildings.   

CBD Grade A1 offices witnessed a three-month rental growth of 3% from May to July 2021. Amongst the 48 Grade A offices tracked, seven buildings in the CBD witnessed rental rebound, with most of them having reputable landlords, better quality and good accessibility. The above suggests prime buildings are leading rental recovery in the CBD.

Through analysing the last five years’ occupancy, we identified 10 less-performing Grade A buildings in the CBD area. Eight of them shared two common features: being strata-titled and ageing over 30 years.

“Despite vacancy rates in the CBD reaching a recent high of 8.4% in May 2021, overall vacancy rates are skewed by certain ‘underperforming’ assets. Omitting outliers yields a healthier vacancy rate of 6.4% for CBD Grade A office as of July 2021,” said Chris Currie, Head of Occupier Services, Hong Kong.

“With flight-to-quality being a noticeable trend amid a tenants’ market, landlords are having to innovate and on occasion reposition their properties in order to respond to changing needs from occupiers in a post-pandemic landscape,” added Currie.        

To find out more about the CBD office market, click here to download the full Colliers Radar.  

 

Join Realestate Asia community
Since you're here...

...there are many ways you can work with us to advertise your company and connect to your customers. Our team can help you dight and create an advertising campaign, in print and digital, on this website and in print magazine.

We can also organize a real life or digital event for you and find thought leader speakers as well as industry leaders, who could be your potential partners, to join the event. We also run some awards programmes which give you an opportunity to be recognized for your achievements during the year and you can join this as a participant or a sponsor.

Let us help you drive your business forward with a good partnership!

New home sales dropped 31.4% during the month.
This is due to elevated supply levels and uncertain demand from the Mainland.
The growth will be more prominent in Japan, Australia, and Hong Kong.
There were 17 major deals worth over US$12.8m each.
Private equity investors’ interest in offices will drive investment demand.
Savills expects rents of outlying business parks to bottom out soon.
Data centres accounted for 34% of all investments during the quarter.
Luxury brands are still wary of going to the high streets.
Q3 Grade A office rents increased 0.7% for the first time in five quarters.
Average multifamily asking rents dropped 3.6% over the year. 
Rents declined in all major submarkets while Kowloon rents proved more resilient.
Sales were propelled by the residential sector.
22% of all residential launches in H1 2021 were from the affordable segment.
But Colliers says transactions may pick up in Q4.