Source: Media Outreach
Headline: Co-working trend keeps Hong Kong office active as rents keep growing
Greater Centralrents reached a new record high at HK$126.6 per sqft per month in Q3, but thepace of growth has slowed from H1Significant newleases by co-working space providers signaled booming co-working trendIncreasedpresence of PRC brands gives new dynamics to the Hong Kong retail market.
HONG KONG, CHINA – Media OutReach – October 12, 2017 – Cushman & Wakefield revealed that office rents in GreaterCentral broke the record again in Q3 but the pace of growth has slowed. Thebooming co-working trend simulated office leasing demand during the quarter. Inthe retail market, the expansion of PRC retailers in a number of sectors wasnotable, as brands seized upon the much discounted rents to set up business.
The realization of pre-leases at newly completed Grade A officebuildings helped boost the overall net absorption to 42,755 sqft in Q3.However, the growth was upset by negative absorption recorded in severalsubmarkets owing to relatively subdued leasing demand and the return of severalwhole floors to the market. Nonetheless, a tight vacancy environmentcontributed to the overall weighted average rents edging up 0.3% q-o-q toHK$80.5 per sqft while Greater Central rentals were up slightly by 0.5% q-o-qto HK$126.6 per sqft — a new record high for Hong Kong.
Supported byrequirements from new start-ups and MNCs seeking more flexible lease terms andCapEx avoidance, demand for co-working space has been relatively strong inrecent quarters. Mr Keith Hemshall,Cushman & Wakefield’s Executive Director, Head of Office Services, HongKong, commented, “The booming co-working trend stimulated moreco-working space providers to lease offices to set up their operation centers. The53,900-sqft lease committed by Spaces (Regus) at Sun House in Sheung Wan (inaddition to the 40,000 sqft already pre-committed in Lee Garden Three), aptlyillustrates the rapid growth of the co-working sector in Hong Kong, with keyplayers such as WeWork, Naked Hub and The Hive having already secured over400,000 sqft of space in Central, Wanchai, Causeway Bay and Kowloon Bay. Weexpect leasing demand will be underpinned as more players enter the market,including landlords who are eyeing this sector as an alternative revenue streamand source of conventional office tenants.”
Meanwhile, PRC companies continued to focus on prime office spacesfor business purposes. Mr John Siu,Cushman & Wakefield’s Managing Director, Hong Kong, said, “Officespace at prime buildings such as ifc and AIA Central remains on the radar ofPRC companies. However, the availability rate in Prime Central at just 3.5% inQ3 — the lowest among all districts — indicates an extremely tight stock tomeet the demand by PRC companies. Given the deals in the pipeline, we expectthe share of new lease by PRC companies, especially those engaged in the assetmanagement and banking and finance, in Greater Central to increase in Q4.”
In the retail leasing market, visitorvolumes had a mild increase of 1.9% y-o-y during the first eight months of 2017.Retail sales were on a streak of growth for six months up to August with anaverage growth of 1.7% per month. Sales of jewelry & watches — the luxurygoods — recorded a substantial increase of 3.2% y-o-y from January to August overother types of goods.
Rental correction continued in Q3 as rentsin Tsimshatsui, Causeway Bay and Mongkok dropped by between 0.3% and 2.1% q-o-q.Under pressure against increased vacancy, Central’s rents fell 3.5% q-o-q andare forecast to decrease 10-15% for the full year of 2017. The trend in F&Brents was similar, which fell between 0.8% and 2.1% q-o-q and Central againunder the biggest pressure.
Notable inQ3 was the expansion or entrance of PRC brands in sectors including cinemas,F&B, cosmetics, fashion, jewelry and gallery, shown by names such as JNBY,MINISO, Cinema City and Hand. Mr KevinLam, Cushman & Wakefield’s Executive Director, Head of Retail Services,Hong Kong, said, “PRC brands are taking advantage of the falling rentsto establish or increase their presence here, as Hong Kong is an ideal firstoverseas market to test the water and helps promote the brand image of thesePRC retailers. In terms of location, PRC brands mostly preferred core locationssuch as Causeway Bay and Tsimshatsui. This is expected to give support to corerents in near future.”
About Cushman & Wakefield
Cushman & Wakefield is a leadingglobal real estate services firm that helps clients transform the way peoplework, shop, and live. Our 45,000 employees in more than 70 countries helpoccupiers and investors optimize the value of their real estate by combiningour global perspective and deep local knowledge with animpressive platform of real estate solutions. Across Greater China, thereare 20 offices servicing the local market. The company was named the top Chinareal estate services firm in four categories of Overall, Valuation,Agency/Letting and Research by Euromoney’s 2017 Survey. Cushman & Wakefieldis among the largest commercial real estate services firms with revenue of $6billion across core services of agency leasing, asset services, capital markets,facility services (C&W Services), global occupier services, investment& asset management (DTZ Investors), project & development services,tenant representation, and valuation & advisory. 2017 marks the 100-yearanniversary of the Cushman & Wakefield brand. 100 years of taking ourclients’ ideas and putting them into action. To learn more, visit www.cushwakecentennial.com, www.cushmanwakefield.com.hk or follow us onLinkedIn (https://www.linkedin.com/company/cushman-&-wakefield-greater-china)
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