Hong Kong prime office rents shrink 1.1% in Q2

Central’s rental rates recorded a 0.2% YoY decline to $161.1 psf monthly.

Hong Kong’s prime office rents contracted by a further 1.1% QoQ, driven by uncertainty over the trade tensions and softer economic conditions, according to Knight Frank.

Central’s rental rates fell 0.2% YoY and a 1% QoQ to $161.1 psf monthly, or US$219.7 psm monthly, with a monthly gross effective rent (inclusive of incentive, service charges, and taxes) of $307.76 psm (US$221.7 psm). It is forecasted to decrease in the next 12 months.

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Overall, Knight Frank projects further declines in office rents for the rest of the year against a backdrop of weakening economic conditions.

“With no end in sight over the trade tensions between the world’s two dominant economies, the looming prospect of a hard Brexit and the ongoing concerns in Hong Kong; we expect the rest of 2019 to remain challenging for the Asia-Pacific office markets,” said Nicholas Holt, APAC head of research for Knight Frank.

Also read: GDP growth holds firm at 0.6% in Q2

On the mainland, a softer Chinese economy and an oversupply situation continues to weigh on Q2 rents with both Beijing and Shanghai recording 1.6% and 1.1% QoQ declines. In East Asia, Knight Frank expects rates in Tokyo and Guangzhou to remain unchanged whilst rates in Taipei’s Downtown submarket are projected to rise in the next 12 months.

Across Asia Pacific, office market rents were noted to have recovered slightly in Q2, rising 0.9% QoQ and reversing the 0.4% decline seen previously. However, office rents decelerated to a 3.4% YoY positive growth during the period from the 6.2% rise in the first quarter. Knight Frank noted that the positive quarterly growth in Q2, despite the generally soft economic climate, was mainly driven by Tokyo’s 6.9% QoQ rise.