East Hong Kong's office rents are increasing.

Larger office tenants are looking to expand in Hong Kong East.

A tight vacancy environment and rising rents, according to JLL's Property Market Monitor released this week, continue to force larger occupiers to seek office space outside of Central and into other submarkets on Hong Kong Island, notably Hong Kong East. As a result, in February 2018, rents in Hong Kong East grew the fastest among the city's major office submarkets. buying a house in qatar

Kering pre-leased two entire floors (37,300 sq. ft) at One Taikoo Place in Quarry Bay as part of their consolidation out of offices in Causeway Bay, making it one of the most prominent new lettings. Meanwhile, RGA Reinsurance moved to Swire Properties' Island East portfolio, leasing 26,000 square feet at Dorset House to fulfill expansion ambitions.

In February, average rent in Hong Kong East increased 0.3 percent month on month to HKD 49.9 per sq. ft, boosted by a 0.5 percent month on month increase in Grade A1 office rents in Quarry Bay. The largest rental rise was seen in the office submarkets, with overall market rentals rising at the slowest rate in a year, at 0.1 percent m-o-m.

As some tenants sought space to expand, Central saw net absorption of 62,400 sq. ft. The Executive Centre, a serviced office provider, is said to have leased two entire floors (29,700 square feet) at Three Garden Road for a new Central site.

JLL's Head of Markets, Alex Barnes, stated, "Occupants with higher requirements have no choice but to seek beyond Central, where vacancy has dropped to 1.4 percent. At the moment, the search is mostly centered on Hong Kong Island, with few Central residents prepared to take the risk of moving across the water. This arrangement will alter as vacancies on Hong Kong Island tightens and rent rises as a result."

"Rental growth is expected to continue in the coming months, owing to limited availability in Central and significant tenant interest in recently finished and upcoming new buildings on Hong Kong Island. Any risks to our existing rental predictions for 2018 will be on the upside if they are sustained. Most Grade A office submarkets are expected to see rent growth of 0-5 percent, according to our current prediction "Denis Ma, JLL's Head of Research, said on the year ahead.


Strong leasing activity in Hong Kong is driving up office rents.

Strong leasing momentum, driven by tenant decentralization and continued expansionary requirements from PRC occupiers, has pushed rents higher in the office market as a whole, according to JLL's latest Property Market Monitor report.

Rents in Hong Kong East increased 0.6 percent month over month, mainly to significant pre-leasing at One Taikoo Place in Quarry Bay. Large occupiers have expressed strong interest in the facility, with EY reportedly pre-leasing roughly 146,300 square feet. Rents in Wanchai/Causeway Bay increased by 0.3 percent month over month as the vacancy rate fell to 2.1 percent, the lowest level in over two years.

The main drivers of increased leasing demand in Central remained requirements from PRC banking and financial institutions, accounting for 76 percent of new lettings in the submarket during the month. Huaxia Bank, which allegedly leased 14,000 square feet at Two IFC to meet growth ambitions, and Ping An Securities, which expanded out of its Sheung Wan headquarters to lease a complete floor of about 14,300 square feet at CITIC Tower in Admiralty, were among the notable new lettings.

The whole market's net absorption was 376,700 square feet, with rents climbing 0.2 percent month over month in March.

JLL's Head of Markets, Alex Barnes, says: "Rents in Central are expected to rise as Mainland Chinese companies continue to expand and there are several significant requirements active in a tight vacancy market. Because of the high prices and limited availability in Central, large occupiers will be enticed to seek new core office districts, allowing landlords in these regions to hike rents. Vacancy rates in Grade A offices are projected to tighten even further in 2018, pushing rents higher."

Denis Ma, JLL's Head of Research, adds: "While prime office rents appear to be on the rise, the retail sector continued to perform well in 2018, with major demand drivers seeing double-digit growth in January and February. Given demonstrable improvements in the inbound tourism industry and retail sales, retail rents are on the verge of recovery. This trend is expected to continue in the leasing market in the coming months."

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