Hong Kong office leasing activities remained sluggish in the first half of 2014, leading to a 1.8% drop in overall grade A office rent, according to Cushman & Wakefield, a privately owned real estate services firm.
Landlords will continue to show flexibility in their efforts to attract and retain tenants.
As a result, rents are likely to drop by an additional 1% to 2% in the second half of 2014. Greater Central rents will be stable.
Overall grade A office rents dropped by 1.8% in the first half of 2014, led by a 5.5% drop in rents in Kowloon East.
Greater Central continued to see leasing demand being supported by mainland Chinese financials and tenants with smaller-sized requirements.
Tenants on 3-year leases expiring this year are facing market rents which are, on average, 20% lower than those under their current lease.
Outside of Greater Central, demand has been sluggish with few tenants willing to expand or absorb relocation costs.
Wan Chai/Causeway Bay, Hong Kong East and Tsim Sha Tsui all recorded slight negative absorption of between 50,000 to 60,000 sq ft over the past six months due to higher availability and tempered demand as more occupiers have shelved their expansions or sought to consolidate their office space.