OFFICE rentals in Hong Kong's Grade-A core markets have remained firm, according to Knight Frank.
However, rentals in t some non-core areas have started seeing rental decline.
According to Knight Frank, average rentals of Grade-A offices rose by only 0.8% in July, following growth of 7.7% in the first quarter and 6.9% in the second.
Knight Frank’s head of research Xavier Wong said rentals in core areas have remained stable due to low vacancy rates and sustained demand.
In Central, the vacancy rate of Grade-A offices fell to 1.0% in July, from the already low level of 1.1% in June, whilst the vacancy rate on
“An international investment bank surrendered a low-floor unit with a gross floor area of about 12,000 sq ft in The Landmark’s
“Meanwhile, legal and management firm Walker’s Group moved from its 5,000 sq ft office in Chater House in Central to a 13,000 sq ft office in the nearby Alexandra House. Such leasing transactions underscore continued demand for office spaces in the CBD,” Wong said.
However, Knight Frank found non-core areas like Hung Hom, North Point and Kowloon East saw rentals fall by 6.3%, 2.6% and 1.7% respectively over the past month.
Executive director Mark Bernard said whilst leasing activities in Kowloon East were more robust than in core areas due to an abundant supply of new office space continuing to attract cost-sensitive companies from other districts, he added that the average rentals in Kowloon East have been dragged down by special deals offered by the landlords of some new buildings to secure anchor tenants.
Meanwhile, in Central and the fringe areas of the CBD, leasing activities remained subdued, due to a lack of new supply.
Bernard said spaces are available only when leases expire or existing tenants surrender their offices.
“Given that demand for office space is likely to weaken in the coming months, owners of strata-titled office units, in particular those in non-core areas, have been more inclined to lower their asking rentals because of increasing competition for tenants. In contrast, landlords of single-owned buildings in core areas have so far been able to maintain their asking rents,” he added.
Bernard forecasts Grade-A office rentals will continue rising for the rest of 2008 and potentially peak in the first quarter of 2009, whilst the substantial supply in the Kowloon East area may further pressure the rents in the coming year.
“Whether office rentals will soften or level off, after peaking in the first quarter of 2009, remains to be seen. This will mainly hinge on how the global credit crunch unfolds,” he concluded.
Australian Property Journal
