Hong Kong office rents at top of the world

HONG KONG, CHINA, July 4, 2017: Cushman & Wakefield revealed that office rents in Greater Central have reached a new record high in Q2 and have the room to rise further in the second half of this year, with the growth supported by continued demand by PRC companies. The retail leasing market saw no way out yet as business in Q2 was generally slow and continued to drive down rents. More retailers opted for pop-up stores instead of brick-and-mortar expansion amid the uncertain market prospects.

Overall office net absorption in Hong Kong dropped 66% to 141,033 sqft in Q2 2017, but the ease in demand did not affect the growth of the overall weighted average unit rents, which rose 0.8% Q-o-Q to HK$80.1 per sqft, due to the decreased availability in most districts. The rental growth was led by Greater Central at 2.9% and Wanchai/Causeway Bay at 1.7% from Q1. The fact that core office rents are all at record high reflects a strong leasing interest in the core areas.

Particularly in Greater Central, PRC companies remained active and accounted for 85% of major new leases in Q2. Notable transactions included HNA Group's lease of 93,600 sqft in Three Exchange Square and Huarong Group's lease of 18,700 sqft in Two Pacific Place. Mr Keith Hemshall, Cushman & Wakefield's Executive Director, Head of Office Services, Hong Kong, said, "Commitments by PRC companies monopolized Q2. The strength of demand will support further growth in rents in the second half of 2017, meaning we shall see more record highs in Greater Central and other core areas."

Mr John Siu, Cushman & Wakefield's Managing Director, Hong Kong, commented, "Given Hong Kong core office rents are now the most expensive in the world and are set for further growth in H2, the pace of decentralization will increase further as the rental gap between Greater Central and non-core areas such as Hong Kong East continues to widen. Despite the lack of major decentralization transactions in Hong Kong East in Q2, occupiers remained interested in the area and were actively sourcing space. We expect more MNCs to consider relocating to quality business space in non-core areas this year."