Hong Kong Office Leasing Market – First Quarter, 2014
Hong Kong Office Leasing Market – First Quarter, 2014
Central
Leasing activities in Central increases over the last quarter, largely underpinned by new lettings from the banking and finance sector. Brown Brothers Harriman, an US investment bank moves from International Commerce Centre in Tsimshatsui and leases 11,460 sq.ft. in Man Yee Building. Another large transaction in this quarter, United Overseas Bank leases 2 floors in Citibank Plaza.
Demand from PRC finance and securities firms remains strong, pushing down the vacancies of core Grade A office buildings in Central. Cinda Asset Management leases 15,500 sq.ft. in AIA Central this quarter. China Securities leases a whole floor 13,107 sq.ft. in Exchange Square Two. Shanghai Pudong Development Bank expands and takes a whole floor at Bank of America Tower.
Many whole floors are available in Central due to various relocations within Central due to consolidation of operations.
This will create opportunities for tenants to take advantage of vacancy.
Hong Kong East
Vacancy in Hong Kong East is 1.7%, the lowest across the broad, mainly due to the continue decentralisation of international corporations and monopolization of Swire Properties in the area. In December 2013, the company increases its presence in this area by acquiring 50% ownership of DCH Commercial Centre, an office building with a gross floor area of approximately 389,000 sq ft located at 25 Westlands Road.
Swire announced its concrete plan to redevelop Cornwall House, Warwick House and Somerset House into two Grade A office buildings. It reaches agreement with the HKSAR Government to exchange ten floors of Grade A office space in Cityplaza Three (approximately 205,000 square feet of gross floor area) for all the areas in Cornwall House currently owned and occupied by the HKSAR Government.
Kowloon East
Vacancy rate is increasing in Kwun Tong due to the completion of new projects and the leasing of strata premises that are originally for sale though now for lease.
With some asking rental rates as low as HK$22.00 psf (G). This area presents attractive rental levels when compared to more established districts.
Billion Development expresses its intention to launch stratified-sale of two Grade A office developments in 2015. These projects include 15-17 Chong Yip Street and 10 Shing Yip Street in Kwun Tong.
Outlook
With the direct share-dealing between Hong Kong and Shanghai stock markets expected to be launched later this year, OfficeAsia expects demand from PRC finance and securities firms will continue taking up existing vacancies in Central.
On the other hand, without concrete signs of global economic recovery, international firms remain cautious on expansion. Landlords are now willing to offer more attractive incentives to attract tenants as surrendered spaces from some international firms accumulate.
OfficeAsia expects Central rents will remain under downward pressure.
The completions of office is estimated to be approximately 1.6 million sq.ft. in 2014. The completions of office is expected to reach 2.98 million sq.ft. in 2015, a 86% year-on-year increase. Kwun Tong takes up 60% of the total office supply in 2015, the highest across the broad.
OfficeAsia expects rent in Kowloon East will experience downward pressure from now to 2015.
Major Grade A Office Supply, 2015 – 2017
| District | Address | Developer | Net Floor Area (approx. sq.ft.) |
| Central | 22 Des Voeux Road | Chinachem | 65,000 |
| Wing On Central Building Redevelopment | Chinachem | 106,000 | |
| Wan Chai | Asian House Redevelopment | Chinachem | 236,000 |
| Causeway Bay | Sunning Plaza Redevelopment | Hysan | 340,000 |
| Wong Chuk Hang | 50 Wong Chuk Hang Road | Sun Hung Kai | 84,000 |
| 41 Heung Yip Road | Cheung Kong | 259,000 | |
| Kowloon Bay | Goldin Financial Global Square | Goldin Group | 680,000 |
| Kwun Tong | 43-45 Tsun Yip St. | Yau Lee Group | 77,000 |
| 10 Shing Yip St. | Billion | 198,000 | |
| 15-17 Chong Yip St. | Billion | 200,000 | |
| 52-56 Tsun Yip St. | Billion | 298,000 | |
| One Bay East, East Tower | Wheelock | 410,000 | |
| One Bay East, Manulife Tower | Wheelock | 410,000 |