The Hong Kong office market experienced stable growth in the first quarter of 2013 and is expected to grow steadily throughout the rest of the year.
According to Cushman & Wakefield's latest research report, Office MarketBeat, performance of Greater Central and non-core districts maintained its divergent trend.Greater Central rents were relatively unchanged from the previous quarter, while rents outside of Greater Central were generally on the rise.
Limited office availability in non-core districts, no new office supply and seasonal factors translated into a quiet leasing market in Q1 2013. In line with ongoing cost control measures by occupiers, which is causing some occupiers to sublet or even surrender their office space, there was a decline in net absorption when compared to the previous quarter.
In Greater Central, indicators hinted that the market began to stabilise after more than a year of softened demand and a significant drop in rents. While some more prime space was released back into the market and net absorption was slightly negative, the availability rate remained stable at 7.3%. Greater Central rents averaged HK$98.77 per sq ft in Q1 2013, relatively unchanged from a quarter earlier.
As more redevelopment projects were confirmed over the last quarter occupiers are facing growing mobility constraints, while at the same time, landlords further increased their rental expectations. Stable to rising rents were recorded throughout all districts apart from in Tsim Sha Tsui, where some new excess space placed downward pressure on rents.
Looking forward, the global economy will brighten with improved growth, therefore enhancing output in 2013 for the services sector, and spurring demand for new office space. Occupiers are likely to face challenges posed by limited new supply and existing low availability.
Rents will further experience some downward pressure in the near-term in Greater Central while stable demand and low availability in non-core markets will continue to encourage moderate to healthy rental growth.
"Hong Kong office market experienced stable growth in Q1 2013," says Gary Fok, Head of Commercial. "There were only two significant new office lease transactions involving more than 40,000 sq ft last quarter."
A few new office set-up and expansion cases were recorded in Greater Central, while tenants continued to seek out more cost effective options in other districts. The new office buildings and office projects under construction in Kowloon East will continue to attract occupiers to relocate their offices to the area. The relatively low availability rate supports rents to grow steadily in the rest of 2013."