Fading office demand in core areas. According to Jones Lang Lasalle, the overall market registered a net withdrawal of 258,000 square feet (sf) in 1H19. This was reflected as an increase in office vacancy as a result of fading office demand in core areas. The overall vacancy rate in Hong Kong continued to rise to 5.3% in Jul- 19 from Dec-18’s 4.2%, according to Jones Lang LaSalle. The leasing market in Hong Kong East held up better within all submarkets, largely led by the ongoing decentralisation trend with the vacancy of 2.7%.
Office Real Estate (Hong Kong)
Growing economic uncertainty brought by the US-China trade dispute slows demand for office space in 2019, particularly from China-based enterprises. Co-working space operators are showing mixed appetite for expansion. Overall, we forecast office rents to remain flat in 2019. The Central office market is peaking out. Island East should outperform other districts as sustained office decentralisation should help narrow the rental differential. The opening of the Central-Wan Chai Bypass has greatly improved transportation connectivity of Island East which is becoming increasingly popular as an option for multinational firms looking for affordable yet quality office accommodation. The office supply glut should continue to cap rentals in Kowloon East.
Key Industry Trends
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