Coronavirus fears continue to affect Hong Kong's office market, with rents falling in January.

According to the latest JLL Hong Kong Property Market Monitor, which was released today, the downward trend in office rents slowed in January 2021, with net effective rentals in the total market falling by 0.6 percent. home

The rental decrease was modest when compared to a 1.1 percent m-o-m dip in Grade-A office rates in December of previous year. Last month, office rentals in the primary commercial districts of Central and Tsimshatsui were reasonably constant. Wanchai/Causeway Bay, on the other hand, saw the most substantial rental decline, with a 1.4 percent month-over-month drop.

The vacancy rate at Central continues to rise, hitting 7.5 percent at the end of January. In the middle of the recession, corporate tenants sought to decrease leasing costs by relocating to more cost-effective office locations, and tenant decentralization remained a popular trend.

According to Alex Barnes, Head of Office Leasing Advisory at JLL Hong Kong, "In January, the Grade-A office market saw a net withdrawal of 366,200 square feet as occupiers continued to downsize. Because of its centrality to the Mainland China market, we predict Hong Kong will recover faster than most comparable markets. Despite a 2.4 percent decline in the total number of regional headquarters in Hong Kong in 2020, firms from the United States, Mainland China, and Italy increased by 1.4 percent, 10.2 percent, and 15%, respectively. In 2020, more Mainland Chinese companies will open a regional office in Hong Kong than in 2019. In the long run, this will improve Hong Kong's office leasing market."

Nelson Wong, Head of Research at JLL in Greater China, also commented on the retail industry: "Due to the current market conditions, landlords of street shops are becoming more prepared to lower asking rents and be more flexible with lease terms. As a result, numerous merchants took advantage of the tenant-friendly arrangements to start and expand their businesses."

China Construction Bank (Asia) has reportedly relocated to Circle Plaza in Causeway Bay and expanded, committing to a four-story shop with an area of 8,024 square feet. At the same time, the bank is renting a 4,098-square-foot shop in Causeway Bay Phase 1.

In 2020, Hong Kong's Central Office Vacancy Rate Will Reach a 16-Year High.

For the first time since 2004, office vacancy has surpassed 7%.

According to the latest JLL Hong Kong Property Market Monitor report, the Grade A office vacancy rate in Hong Kong's Central Market increased to 7.3 percent in December 2020, topping 7% for the first time since 2004.

Because a significant quantity of marketable and surrender space is expected to return to the market in the next months, the vacancy rate will continue to rise. Only a few tiny transactions were recorded as leasing activity slowed at the end of the year.

Due to the ongoing occupant reduction trend fueled by the economic downturn, Grade A office net absorption was -175,600 sq ft last month. Lane Crawford, for example, departed a floor (16,500 sq ft, GFA) at FTLife Tower in Kowloon Bay, while FTLife Insurance vacated a floor (19,400 sq ft, GFA) at One Island South in Wong Chuk Hang. DHL is also said to have leased 90,900 square feet (GFA) at the International Trade Tower in Kwun Tong, downsizing and relocating from Kowloon Bay.

JLL's Head of Office Leasing Advisory in Hong Kong, Alex Barnes, said: "The rental downturn continued in all major office submarkets in December, with net effective rents in the overall market falling 1.1 percent month over month. The biggest dramatic decrease in rents occurred in Tsimshatsui throughout the month. Its rents fell 1.7 percent month over month, while those in decentralized submarkets stayed stable "ilative."

Nelson Wong, Head of Research at JLL in Greater China, said on the retail market: "As high-street shop rentals fell to levels similar to those seen in 2003, numerous high-end brands committed to opening new locations in prime shopping districts. Meanwhile, retailers focusing on domestic demand filled a number of vacant stores. The increasing leasing momentum has helped to alleviate vacancy pressure on high streets by a small amount."