Hong Kong Office Space Agents
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Hong Kong Office Market Forecast

May 2019

Market Forecast

Prime rates have peaked, secondary rates still firming

Hong Kong is still the most expensive office location in the world, with occupancy costs some 59% high than midtown New York.

However, with weaker sentiment in the financial sector prevailing and the drop off of leasing activity with PRC companies, prime rental rates have stopped advancing, peaking at the beginning of the year and were flat in Q1 this year. Notwithstanding this, growth in the secondary market / other submarkets still persists driven by rent refugees from Central.

Currently, landlords are holding out for their asking rates to secure quality tenants, but many tenants have become even more cost conscious and are prepared to consider other locations/districts. The main beneficiaries of these conditions have been Causeway, Quarry Bay and Wong Chuk Hang.

The top prime Grade A rate averages around $165.00 per sq ft, but in Central as a whole, the prime rates are static at around $137.00 psf.

We expect demand from co-working space operators to soften compared to 2018. In fact, we may even see some consolidation in this sector and it is possible some outlets in less successful locations may be given up. With very few new developments for the next 2 years, rates overall will remain firm and movement may be stagnant due to a scarcity of supply. In the meantime, Central remains the most exposed to any downturn and we anticipate prime rental rates to drop 3% to 6% in 2019. This is due to weaker demand and a more cautious cost conscious approach, at this time of uncertainty. Kowloon is expected to be stable, with insurance companies being particularly active and we anticipate a modest increase in rates of between 1% and 3% in 2019, due to ample supply.

Whilst demand from PRC firms has softened, The Greater Bay Area initiative and China’s ambitions for its bigger companies to go global, is likely to ensure that this demand will eventually return and once again, provide important support for the office market’s future growth in Hong Kong.