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Offices – Falling rents

Published on February 13th, 2014

Savills latest Hong Kong office briefing, out today, shows falling rents in all submarkets in the last quarter of 2013, for the first time since the dark days of Q2, 2009.

Central was the only district to see a fall in vacancy rates and the pace of rental decline there fell to 1.3%, down 70 basis points from Q3. This means Central rents fell 6.4% last year. Take-up from PRC firms has been thing keeping Central going from a demand perspective.

In Wanchai/Causeway Bay, rents fell 0.5% and by 0.7% in Island East. On Kowloon side, rents fell by 0.8%, 0.5% and 0.1% in Tsim  Sha Tsui, Kowloon East and Western  Corridor respectively.

Savills expects the Grade A office  market to decline by 5% this year, as  “the global economic recovery is still uncertain and firms remain wary of expanding or increasing headcount,” head of research Simon Smith says.

Read the whole report here.

The Hong Kong market is probably choppiest in the world – rents are down 21% from the last peak in 2011, which followed the slump of 2009. Compared with, say Berlin, that’s probably two decades worth of volatility (no I don’t have data to back that up).

Interesting that it is PRC firms propping up the market in Central, another source of concern for Hongkongers worried about the ‘Mainlandisation’ of their city. With visitor numbers forecast to double to 100m a year, mostly from the PRC, and the city already seeming to be an out-of-town shopping district for Guangzhou, they may have a point.

However, it is ‘one country, two systems,’ remember…

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