This undated photo shows Kevin Lam Ying-wai (left), executive director and Hong Kong head of retail services of Cushman & Wakefield, and John Siu Leung-fai (right), managing director of Cushman & Wakefield's Hong Kong office. (PHOTO PROVIDED TO CHINA DAILY)
Hong Kong’s office leasing market will regain momentum in the second half of 2022, led by financial and banking tenants, forecast real estate consultancy Cushman & Wakefield.
With the pandemic winding down and new development projects due for completion, the firm expects a mild downward adjustment in office rentals of between 50 and 100 basis points in the second quarter, followed by a gradual recovery of leasing activities in the second half of the year with subsequent stabilization in rental levels.
With the pandemic winding down and new development projects due for completion, Cushman & Wakefield expects a mild downward adjustment in office rentals of between 50 and 100 basis points in the second quarter
John Siu Leung-fai, managing director of Cushman & Wakefield’s Hong Kong office, estimated a total net absorption of 300,000 to 500,000 square feet in 2022, “with the banking and finance sector leading demand for office space, while the professional services and logistics sectors will also remain active”.
Three Grade A office projects in non-core areas — 888 Lai Chi Kok Road in Cheung Sha Wan, Landmark South in Wong Chuk Hang and Two Taikoo Place in Quarry Bay — are expected to be completed in the second half of 2022, bringing 2.3 million square feet of new floor area to the market.
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“These completions will help fuel office expansion and relocation, although the influx of space will inevitably ramp up the overall availability rate from 13.6 percent to around 16 percent to 17 percent,” Siu said.
Rentals of Grade A offices edged down by 0.9 percent quarter-on-quarter in March, according to Cushman & Wakefield, and the city recorded a positive net absorption over three consecutive quarters, amounting to 245,100 square feet.
The banking and finance sector accounted for the lion’s share — 34.7 percent — of new transactions in the first quarter, the firm said. US-based investment firm Invesco, brokerage CLSA and Citibank led the office expansion in the sector.
Siu said with beneficial polices for the international financial hub under the nation’s 14th Five-Year Plan (2021-25), the Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area, and the geographical advantage of proximity to the Chinese mainland, Hong Kong’s financial institutions will continue to seek space and talent.
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Kevin Lam Ying-wai, executive director and head of retail services of Cushman & Wakefield, predicted that there will be little room for further overall rent reductions, and said that the market will gradually recover from the third quarter onward.
Retail sales declined by 4.9 percent year-on-year in January and February, and rental levels fell around 3 percent in multiple districts, including Mong Kok, Causeway Bay and Tsim Sha Tsui, the firm said.
Lam said retail vacancy rates in key districts have been affected by the pandemic to different extents. Mong Kok and Tsim Sha Tsui suffered the most, with vacancy rates at 16.4 percent and 14.3 percent, respectively.
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tianyuanzhang@chinadailyhk.com