Decline in Grade-A office rents persisted in February

It was the 21st consecutive month that the overall office rent saw a decrease, JLL said.

The overall Grade-A office rents dropped again in February due to the weak leasing demand, JLL reported in its latest property market monitor.

Grade-A office rents slipped 0.8% MOM in February, following a 0.6% MOM decrease in January. The report noted it was the 21st consecutive month rents declined due to the pandemic.

“The COVID-19 pandemic has prompted tenants to reconfigure their workplace and, in some cases, seek flexibility as part of their solution,” said Alex Barnes, head of office leasing advisory at JLL Hong Kong.

“Flexible workspace providers continue to expand in Hong Kong on the back of this and moves from some big name occupiers seeking solutions for work from anywhere staff," he added.

In particular, rents in Tsim Sha Tsui decreased 1.7% MOM, the highest among major office submarkets. Meanwhile, rents in Hong Kong East and Kowloon East remain stable.

JLL also reported the net absorption of overall Grade-A office reached -55,100 square feet in February. Total surrender space increased 1.77m sq. ft., the highest level ever recorded, as businesses attempt to minimise rental costs.

Vacancy rate of overall Grade-A market remained stable at 9.3% in February, similar to the rate recorded in the end of January. Central also maintained a 7.5% vacancy rate.

Nelson Wong, head of research at JLL in Greater China, said there is a higher interest amongst investors in buying retail and industrial properties as retail rents are expected to decline in the coming months.

He added emergence of online sales affected the demand for logitistics and storage space.

“The government's pilot scheme for charging land premium at standard rates for redeveloping industrial buildings will also lure investors to eye on industrial assets with redevelopment potential,” Wong said. “We expect the retail and industrial properties will continue to be the focus of investors in the second quarter of this year."

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