Hong Kong's Office Leasing Market Feels A Slight Chill; Banks Consolidate Space

Tom Burroughes

23 July 2014

The office leasing market in Hong Kong remained “sluggish” in the first six months of this year, according to Cushman & Wakefield, the real estate services firm. The report reflects a wider trend of a cooling property market in the jurisdiction.

Overall grade A office rents dropped by 1.8 per cent in the first half of 2014, led by a 5.5 per cent drop in rents in Kowloon East.

Grade-A office net absorption totalled a modest 123,000 sq ft and only crossed into positive territory due to take-up in Kowloon East, primarily within new stratified buildings completed since late 2013, the firm said in a regular overview of the market.

By sub-market, leasing activities continued to gain momentum in Greater Central, as evidenced by positive net absorption of 120,500 sq ft, but remained subdued in other locations, it said.

Greater Central continued to see leasing demand being supported by mainland Chinese financials and tenants with smaller-sized requirements. For example, China Securities International recently expanded by a floor of 13,000 sq ft in Two Exchange Square earlier this year, while China United Credit Finance took a whole floor of 22,000 sq ft in Two Pacific Place.

The report noted that foreign financial firms, such as Roybal Bank of Scotland, UOB and Wells Fargo are still tending to reduce their size or shift for cost reasons.

Wan Chai/Causeway Bay, Hong Kong East and Tsim Sha Tsui areas recorded slight negative absorption of between 50,000 to 60,000 sq ft over the past six months due to higher availability and tempered demand as more occupiers shelved their expansions or sought to consolidate their office space.