Leasing activity remains robust in Hong Kong, despite a contraction of the occupier market, and this is largely led by demand from co-working and serviced office operators looking out for expansion opportunities.
According to the latest Monthly Market Monitor on Hong Kong by Jones Lang LaSalle, as at June 2017, returning office stock arising from expiring leases led to a nett withdrawal of 16,000 sq. ft in the Grade A office market.
Nevertheless, the last few months saw an extraordinary amount of take-up from the co-working sector, with both new entrants and traditional occupiers being active in the market.
JLL’s regional director of HK markets Paul Yien said that nett demand growth has been thin in the market, but the arrival of co-working space operators represents a welcome source of new demand for the leasing market.
Yien said JLL helped co-working space operator WeWork secure a location along Jaffe Road in Causeway, leasing 93,000sq ft over nine floors at Tower 535. Subsequently, the market has seen a number of other operators – including some of the city’s incumbent serviced office operators –establishing new set-ups in the city.
Some include Regus, which has committed to a 26,800sq ft space at Lee Garden Three in Causeway Bay, and the Shanghai-based Naked Hub is expanding into Hong Kong with 16 floors and 55,000sq ft at Bonham Circus in Sheung Wan.
The growing popularity of co-working offices in Hong Kong is not only being driven by start-ups but also larger corporate occupiers looking to better utilise their real estate within the city. They are starting to see the advantage of the greater flexibility, convenience and savings.
JLL pointed out that because most Grade A offices in Central may be beyond the reach of businesses that choose co-working spaces, the impact of these new market entrants will be felt more in Grade B offices outside of the central district.
Landlords might also consider adding co-sharing office operators into their portfolios to help broaden their tenant base.
Outside the co-working space sphere, PRC banking and finance firms remain the key drivers of leasing activity in Hong Kong’s central district. These account for around 46% of all new leases in terms of floor area.
Overall rents in the central district advanced 0.3% month-on-month, surpassing the record highs set in 2008.