Grade-A office vacancies in CBD hit 3.4% in 2019

Office decentralisation efforts prompted it to hit its highest level in five years.

Vacancy rate of grade-A offices in CBD came at 3.4% in December according to a report by Knight Frank. Vacancies in its peripheral districts Admiralty, Wan Chai, and Causeway Bay also went up during the same period.

Specifically, vacancies in the Admiralty district ended at 5.6% in 2019, followed by Wan Chai district at 5% and Causeway Bay at 4.1%.

Overall, these figures are said to be at its highest levels in five years. The uptick in vacancies was attributed to the increased efforts in office decentralisation, said the report.

Meanwhile, office leases in the Kowloon district further weakened in the same month. Most of the transactions recorded during the month were small offices with an area of less than 3,000 sqft., and with monthly rents below $25 psf.

Knight Frank stated that the large amount of office supply and the increasing number of downsizing cases in the Kowloon district have prompted landlords to become more flexible in negotiations and provide attractive renewal incentives to retain existing tenants. These terms will persist in the coming months.

Office rents in Kowloon should continue to soften in H1 2020 but are projected to and pick up in H2 when most of the supply is absorbed.

Knight Frank also sights that for CBD office spaces, the demand with rent prices of $100 psf would remain strong as more firms are looking for options to optimise their office-leasing budgets.