Grade-A office leasing market are experiencing a polarization

And it’s becoming more and more apparent.

The polarisation in the Grade-A office leasing market has grown more apparent.

According to a research note from Knight Frank, on the one hand, demand continued to be driven by Mainland Chinese firms. For example last month, a Mainland firm reportedly leased a high-floor premise in a premium building in Central at a record high rental rate after the financial crisis.

On the other hand, a number of multinational corporations have been downsizing or even retreating from Hong Kong amid uncertainties in the local and global economies.

In the near future, Knight Frank expects the Grade-A office market to become more polarised, especially in Central.

Here’s more from Knight Frank:

While premium Grade-A office buildings will continue to attract Mainland firms, given their quality, reputation and sea views, traditional Grade-A buildings in the district will see weaker demand.

Looking ahead, although the Grade-A office market is likely to continue outperforming other property sectors, the increasing challenges facing the Hong Kong and Mainland economies could add uncertainty to the sustainability of office demand.

We expect office rents in core business areas, which have already been at high levels, to remain largely stable in 2016. The extremely low vacancy rates may also reverse if there are more downsizing and surrender cases.

Meanwhile, Grade-A office rents in Kowloon East are likely to decline this year, with abundant supply in the pipeline, while those in Tsim Sha Tsui and Mong Kok are expected to remain firm or slightly increase, with supply continuing to be limited.