Prime office rents in the city’s Central business district inch up on the back of an overall improvement in vacancy rates
Prime office rents in Hong Kong’s Central business district rose modestly in November – the first time in three and a half years – on the back of an overall improvement in vacancy rates, which helped buttress the negotiating stance of landlords, according to a property consultancy.
Rents in Central inched up 0.1 per cent to HK$72.90 (US$9.36) per square foot from October, as the number of empty offices decreased slightly to 13.1 per cent from 13.4 per cent, the consultancy said. The last time that rents in Central recorded an increase was in May 2022, it said.
That reflected how tenants in Central had been capitalising on a soft rental market to upgrade their office space.
“Tenant expansion and flight to quality gather pace,” a property consultant said. “This supported rental stability and prompted a modest uptick over the month.”
Among the recent notable office rental deals in Central was Hong Kong-listed Migao Group Holdings, one of China’s largest potash fertiliser companies in terms of sales. It leased a 10,201 sq ft office space at Cheung Kong Center II , relocating from Cofco Tower in Causeway Bay, according to the consultancy.
Several Western groups have also recently expanded into Hong Kong. Chicago-based Adams Street Partners last week unveiled its office in the city at Nexxus Building on Connaught Road in Central.
Earlier this month, Swiss firm MKS PAMP, one of the world’s largest refiners and traders of precious metals, opened its 3,600 sq ft regional headquarters at the St. John’s Building on Garden Road in Admiralty.
Paris-based Ardian opened a 4,000 sq ft office in Central’s Two International Finance Centre late last month, with an eye on growing its US$3 billion investment from Hong Kong-based clients.
French banking giant Credit Agricole CIB this month extended its lease on an 85,000 sq ft prime office space at Pacific Place in Admiralty until 2034.
In June, US quant trading firm Jane Street Asia announced an expansion that involved one of the largest leasing transactions in Central, as the firm agreed to pay a monthly rent of HK$30.6 million, or HK$137 per square foot, for a 223,437 sq ft office space in Central Yards – Henderson Land’s nine-storey building at its prized mixed-use development at the New Central Harbourfront.
Meanwhile, Alibaba Group Holding and fintech affiliate Ant Group agreed to pay HK$7.2 billion to buy the top floors of a Causeway Bay office tower that Mandarin Oriental International is building on the old site of The Excelsior Hong Kong hotel. This marked the city’s largest real estate transaction since 2021.
That purchase covered 301,555 sq ft of office space at One Causeway Bay , comprising the top 13 floors of the 24-storey building, with parking space for 50 vehicles and signage rights to the tower. Alibaba owns the Post.
The city’s grade A office leasing market recorded a positive net absorption of 293,300 sq ft in October, according to the consultancy, adding to the sector’s positive performance in the third quarter.
In the September quarter, total net absorption in the city’s offices rebounded by 137.5 per cent to 646,000 sq ft, reversing the subdued performance in the first half of the year, it added.
“Notable improvements were evident in the Wan Chai/Causeway Bay area and Tsim Sha Tsui, where vacancy rates fell to 10.5 per cent and 7.5 per cent, respectively,” another property consultant said.
The improvement in the city’s office leasing market comes amid a revival in the business environment. As of October, both registered local and non-local companies – 151,226 and 15,534, respectively – surpassed their full-year 2024 totals, according to official data.
On the investment side, 42 deals for premium office spaces were recorded so far this year, a five-year high that could potentially challenge the volume levels in 2019, according to a local property agency.
Total value amounted to HK$4.17 billion, which exceeded the HK$3.35 billion reached in 2018 and set a four-year high, the agency said.
“Grade A office rents have recently stabilised, indicating a continued recovery in market demand,” a property agent said. “The rebound in rents and transaction volume in core commercial buildings reflects not only investors ‘buying on dips’, but also many institutions looking to upgrade their office quality and expand, leading to a significant increase in both rental and sales volumes.”
