Prominent real estate advisor Savills pointed out in its Q4 office leasing report that overall Grade A office rents rose by 1.3% to record levels. Wanchai / Causeway Bay, popular among rent refugees from Central, recorded the highest rental growth among major business districts (+10.2%).

During 2018, overall rents were up by 7.8%, while all districts have recorded positive rental growth since Q4/2017. With average Grade A rents reaching HK$146 per sq ft per month net effective, Central’s rents were up 9.0% over 2018. As a result of the displacement demand from Central tenants, rents in Wanchai / Causeway Bay surpassed the Hong Kong average increase of 1.3% with 2.6% growth in Q4 and 10.2% over 2018 as a whole.

The Hong Kong Island vacancy rate hit 2.0% in December representing only 661,000 sq ft; while Kowloon East, where average rents are HK$35.5 per sq ft net effective, saw an increase in vacancy from 5.3% in Q3 to the current 5.7% due to high supply volumes.

Coworking space has been expanding rapidly and now totals 2.16 million sq ft across major business districts in Hong Kong at year-end 2018, but 2019 may see a slowdown in this sector.

Mr. Simon Smith, Senior Director, Research & Consultancy said: “Rents continue to test affordability in most districts as tenants search for a dwindling number of decentralised alternatives. We are seeing new financial districts emerging because of the sustained higher rents in Central. For example, Causeway Bay is proving popular among Asian banks while Island East tends to attract the middle and back offices of multinational financial-institutions.”

Mr. Ricky Lau, Deputy Managing Director & Head of Office Leasing said: “The office leasing market is generally stable with low vacancy rates and is less likely to face a correction in 2019. Looking ahead, Grade A rents will continue to make modest gains but a protracted trade war and/or a sustained stock market sell-off could reverse that.”