Office rental growth in Hong Kong, the world's most expensive office market, is in a state of acceleration.
The city's April office rents increased at their fastest pace in more than two years, driven by low vacancy levels and active leasing demand, according to a May 22 report by JLL.
Overall, rents jumped 1.1% in April from the previous month, after edging up just 0.2% in March, JLL said. The total net absorption reached 634,200 square feet in April, while average monthly rent was HK$72.70 per square foot.
The east side of Hong Kong Island and the Kowloon East area contributed the majority, or 76%, of all new lettings in terms of floor space in April, with month-over-month rents expanding 3.1% and 1.2%, respectively.
Among them, the biggest deal was DBS Group Holdings Ltd. occupying seven floors at Two Harbour Square in the Kwun Tong district, the report added, as the Singapore-headquartered bank is planning to consolidate its back office operations to run out of Millennium City 6 and One Island East.
In the Central area, the city's central business district, mainland Chinese companies, particularly those from the banking and professional services sectors, remained the key drivers of demand for office space. JLL estimates 53% of new lettings in Central were taken up by mainland Chinese companies in April.
Grade A office vacancy rates in Central stood as low as 1.5% during the period, relatively flat from the 1.4% logged in March.
With the historically low unemployment rate as well as the city's favorable economic climate, JLL Hong Kong Head of Research Denis Ma expects office leasing demand and rentals to continue to climb in the next few months.
"We've revised our forecast upwards and now expect Grade A office rents to advance in the range of 5%-10% in 2018," Ma said.
