The silent debut of Shenzhen-Hong Kong Stock Connect is expected to further boost demand by the PRC financial services firms in Central Hong Kong. With this, Central Hong Kong will continue to be the only office submarket to record rental growth in 2017, as reported by JLL’s year-end Hong Kong Property Review 2016.
In the last five years, a big rental gap has been observed between core and non-core office areas with 3.3 times higher price due to office tenant decentralisation. Since some of the foreign banks downsized their footprints in Central HK relocating to the city’s eastern part while insurers were more inclined towards Mainland China policyholders, the demand in Central HK has increased to 44 per cent of all new lettings.
Besides banking and financial sector, the leasing market benefitted from the expansion of co-working space operators that resulted in number of landlords reserving floors with an expectation to accommodate operator requirements.
Office rents have arisen by 9.2 per cent, which is just 4 per cent lower than the all time highs set in 2008, due to PRC demand in Central HK. At the same time, the supply side pressure is up by 0.5 and 1.5 per cent in Tsimshatsui and Kowloon East.
“We expect leasing demand to be moderate in 2017 owing to the modest growth forecasted for the local economy. Net take-up is expected to amount to about 690,200 sq. ft., compared with a net withdrawal in 2016,” says Ben Dickinson, Head of Leasing at JLL.
“We expect Central HK to be the only submarket to record rental growth next year, in the range of 0-5%, on the back of a tight vacancy environment,” he added.
Source: World Property Journal