Negative net absorption. According to Jones Lang Lasalle, the overall market registered a net withdrawal of 217,500 square feet (sf) in 1Q19, the first since 2Q17. This was reflected as an increase in office vacancy as a result of fading office demand in the core areas. Coupled with the completion of One Hennessy in Wan Chai and NEO in Kwun Tong, the overall vacancy in Hong Kong rose to 4.8% in Apr-19 from Dec-18’s 4.2%, according to Jones Lang LaSalle. The leasing market in Hong Kong East held up better within all sub-markets, largely led by the ongoing decentralisation trend.
Office Real Estate (Hong Kong)
Growing economic uncertainty brought by the US-China trade dispute may see demand for office space continuing to slow in 2019, particularly from China-based corporates. Co-working space operators are showing mixed appetite for expansion. Hence, the office leasing market will continue to be driven by tenant decentralisation and office space consolidation. The opning 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. Overall, the prevailing vacancy rates are still relatively low and this should offer some rental support. We are projecting that overall office rent growth will moderate to 2-3% in 2019. Island East is expected to outperform given improved transportation connectivity.
Key Industry Trends
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