Mid-tier and lower-end buildings are biggest culprits in Hong Kong office vacancy

Overall vacancy rate is flat, though.

The overall vacancy rate stayed flat (4.4%) in 1H14, with vacancy largely concentrating in several mid-tier and lower-end buildings.

According to a release from JLL, in Central, the vacancy rate continued to improve, edging down from 4.6% at end of December 2013 to 4.0% by end of June; benefitting from robust leasing demand in the top-end of the market which saw vacancy in the Grade A1 segment tightening to three year lows.

Meanwhile, in Kowloon East, JLL noted that the vacancy rate declined from 7.8% in 2013 to 6.7% by end of June with purchases by owner-occupiers in newly completed Grade A offices contributing to expansion of the occupier market.

Over 40% of the vacant space in the submarket, however, was concentrated in buildings built for the sales market.

Here’s more from JLL:

Rentals grew by 1.3% in 1H14, gathering momentum across all submarkets except in Kowloon East where increased competition from refurbished industrial buildings (utilising the government’s revitalisation policies) led to a marginal rental decline in 1H14.

In contrast, rentals in Central returned to growth, edging up by 1.9% in 1H14 on the back of tightening vacancy at the top end of the market.

Nevertheless, with the mid-range of the market remaining under vacancy pressure, the ability for landlords to aggressively push rentals was limited.