Hong Kong Office Market Shrivels Again as Travel and Leisure Fail to Turn Tide 

Hong Kong’s Grade A office market in July saw tenants give back 224,600 square feet (20,866 square metres) more than they took up, though rising momentum from travel and leisure occupiers offered a bright spot amid the gloom, according to JLL.

The city’s overall vacancy rate rose marginally to 12.8 percent from 12.6 percent in June, the property consultancy said in its Hong Kong Property Market Monitor report. Vacancy rates stood at 9.6 percent in the prime Central district, 10.2 percent in Wan Chai/Causeway Bay and 12.7 percent in Hong Kong East, all creeping up 0.2 percentage points from month-earlier levels.

Net effective monthly rent eased 0.6 percent to HK$53.80 ($6.86) per square foot in July, said JLL analysts led by senior research director Cathie Chung.

Central and Wan Chai/Causeway Bay witnessed respective rental drops of 0.6 and 1.4 percent, while Kowloon commercial hub Tsim Sha Tsui saw a marginal increase of 0.1 percent.

Kowloon Bay Sparkles

Among notable leases in July, local e-commerce travel platform KKday took up 7,600 square feet of gross floor area at One Kowloon in Kowloon Bay to expand its office from Eastmark in the same district. Also in Kowloon Bay, Kuwaiti-backed Wafra Capital Partners rented 13,900 square feet at Billion Centre Tower A.

The market showed signs of a pulse this week as CSI Properties landed the city’s largest office lease of the year so far — again in Kowloon Bay — with the company signing up Hong Kong’s Hospital Authority for its Harbourside HQ project.

CSI said the Hospital Authority is leasing up to 100,000 square feet of office space at Harbourside HQ, which was known as Octa Tower until CSI led the acquisition of the 26-storey building in 2018.

The Hospital Authority’s lease with CSI outstrips MUFG Bank’s 86,800 square foot commitment at Nan Fung Group’s Airside project in Kai Tak in March, which had ranked as the year’s biggest office deal. CSI did not cite financial details for the agreement, with online listings currently promoting smaller units in the building at monthly rates from HK$17 to HK$20 per square foot.

DL’s New HQ

In the capital market last month, DL Holdings Group bought the top five floors and the naming rights of 92 Wellington in Central for HK$300 million ($38.3 million). The HKEX-listed finance firm will relocate its headquarters to the building, which is to be rechristened DL Tower.

CSI Properties bought up 92, 94 and 96 Wellington Street in 2019 and later redeveloped the combined site into the soon-to-be-completed Ginza-style commercial building.

DL chairman Andy Chen noted that rising interest rates have resulted in asset price declines, presenting a prime opportunity to buy at the 92 Wellington project, which is jointly owned by CSI and an unidentified Canadian pension fund.

“Hong Kong’s commercial property prices have already dropped by 26 percent from their peak,” Chen said. “As an asset management company, we cannot overlook such a chance for investing in global real estate.”