Rental declines were milder in Kowloon with vacancy gradually absorbed after the aggressive rental adjustments of late last year.
- Grade A rents fell by 1.5% in Q3/2021 compared with a 2.6% decline in Q2/2021.
- The Central office market has been buffeted by the same headwinds as other markets, but despite this we have seen some selective expansion demand and new leases among Mainland financial institutions as well as new industry tenants.
- In the uncertain environment, serviced offices are popular, and we note more take-up from large operators in core business districts.
- Rental declines were milder in Kowloon with vacancy gradually absorbed, particularly in Tsim Sha Tsui and Kowloon East.
- Vacancy rates continued to climb to 9.3% in Q3 with office buildings in some areas, such as North Point and Kowloon West, suffering more than others.
- Upcoming supply in prime areas is seeing some early pre-commitment.
- As Central’s rental premium over the rest of the market narrows, decentralised rents may in turn come under pressure. Looking ahead, during a period of uncertain prospects and elevated supply, a lot will depend on demand from PRC firms over the next 12 to 24 months.