Office market overall rental growth turns red for first time since 4Q14

Tenants are putting pressure on rental growth.

With rents stable on Hong Kong Island but softening in Kowloon, overall rental growth turned negative for the first time since Q4 2014.

According to a research from Colliers International, overall grade A rental growth turned negative with a QOQ decline of 10 basis points in Q3 reaching HKD74.16. This is the first time since Q4 2014 that the overall quarterly rental growth turned negative.

Central / Admiralty and Wan Chai / Causeway Bay rents stayed steady with just a QOQ growth of 0.1%, reaching HKD117.13 and HKD68.78 respectively.

Rents in Island East recorded a QOQ negative growth of -1.1% reaching HKD48.94. This is the first time since Q4 2014 that Island East recorded a negative quarterly growth.

Here's more from Colliers International:

In Kowloon, Tsim Sha Tsui and Kowloon East rents continued to soften with QOQ growths of -0.6% and -0.1% reaching HKD55.12 and HKD34.95 respectively. We attribute the stability of rents in Hong Kong Island to the fact that supply is very limited and that overall demand for space remains strong, with mainland Chinese companies and the insurance industry two important sources of overall demand for space.

On the other hand, we see signs of increasing cost consciousness on the part of major tenants in the banking and finance sector and mainland Chinese tenants who have been the driving force behind strong rental growth in the past. There is also evidence that mainland Chinese tenants are more interested in buying office space rather than leasing.