Office rents in Hong Kong predicted to jump 4.5%

Rents in Central to increase 3.5%.

According to Macquarie Research,  it expects "Central" office rents to grow 3.5% in CY13 and 7.5% in CY14, while it expects "Overall‟ office rents to grow 4.5% in CY13 and CY14.

Here's more from Macquarie:

The leading indicators of demand for office space in Hong Kong have strengthened; however our industry contacts suggest lease enquiries remain weak.

While the expansion demand from large scale financial institutions remains subdued and some institutions are still consolidating their office space, small PRC funds and asset management firms are quite active in 2013.

The HSI has bounced from the trough of ~19,831 in June 2012 to the current ~22,200, though it remains well below the peak of ~24,964 in November 2010.

„Banking & financial services‟ hiring intentions increased from 27.3% in 1Q13 to 52.9% in 3Q13, and the business registrations growth rate has improved to ~10.3% per annum; the unemployment rate is now just 3.3%, down from the peak of 5.4% in 3Q09.

Supply position attractive. The supply side in Hong Kong remains very attractive, with overall vacancy at just 3.8% and only 4.6% of existing stock coming in new supply over the next three years.

In „Central‟ the current vacancy rate is just 4.5%, and expected new supply over the next three years equates to just ~0.2% of existing stock. The key new supply in Central and Wan Chai includes CCB Tower, 8 Queen‟s Road East and 28 Hennessey Road.

However, only two floors at CCB tower are still available for lease, while 8 Queen‟s Road East has been 100% pre-committed.

Rental forecasts … Lease enquiry remains weak, and with slow global economic recovery and slower China GDP growth, this is unlikely to change in the short term, while the limited supply in the next three years is in favour of Hong Kong landlords.