The ratio of newly rent from China enterprise falls last year after rising for six years to 29% from 49%.
Hong Kong Wen Wei Po (By Yan Lunle)
China enterprises lose interest on office building in Central District. The ratio of newly rent of commercial building in Central office building from China enterprise falls after rising for six years to 29% in last year from 49% in 2017 calculated by floor area, according to latest data from Jones Lang LaSalle. Industry pointed, the office building rent rose about 7% last year, but it is estimated to rise by 5% at the highest because of effect from economic growth slowdown on the mainland and government is tightening capital outflows. With investment demand from the mainland expected to remain weak, the value of the class A commercial building is expected to fall 5% to 10% this year.
Office rental demand fell in the second half of last year, particularly from Chinese companies with the ratio of new lease transactions in central fell from 49% in 2017 to 29% last year, Jones Lang LaSalle mentioned in Hong Kong's commercial property performance and future prospects that recently released. The ratio of Chinese-funded new office leases fell from 19% in 2017 to 15% last year. Tenants moving out of the core business district is still the main trend of the rental market, and more multinationals are moving to cheaper rental locations.
Rental demand slowdown restricts rent growth.
The outlook for Hong Kong economy is unclear affected by Chinese economy slowdown and uncertainties from the trade war between the us and China, and office rental demand is expected to continue to slow this year, making upward pressure on vacancy rates which will lead to a slowdown in rent increases, the Leasing Business Director of Jones Lang LaSalle, Pang Dingqin expressed.
It is worth noting that the available office space is still in short supply, with office vacancy rates are all below 2% expect Kowloon East, and the vacancy rates in Central office building close to the historical low level. This trend drives the rent in Central Class A office building rose 7.5% to average sq ft monthly price of HKD 127.4, and the whole office building rent rose by 7%. However, the upward momentum of rent in most commercial areas began to slow in the second half of last year.
The current very low vacancy rate will help to support the overall office rents to rise by 0-5% this year, Pang Dingqin continued. However, Central where rents have risen the most in the past two years, will lag behind same as Kowloon East in terms of rent increases this year, because it suffered the most by falling demand from Chinese companies.
As Chinese companies slow their pace of expansion and free up space this year, the rent rising of Class A office building in Central and Queensway will slow down, Colliers International also pointed. The pace of Chinese office leasing slowed, with the ratio of newly rent in core area fell to 18% from 28% in the third quarter of last year, CB Rid Ellis believed.
Investment in industrial and commercial property fells.
The investment market also experienced a similar up to down last year Last year, mainland total investment in Hong Kong's industrial and commercial property investment market rose 22% to HKD 24.4 billion compare with that in 2017, according to data from Jones Lang LaSalle. However, as the rising mainland economic uncertainty and further tightening controls on capital outflows, investment appetite from mainland funds has dropped significantly in the second half of the year, with only 8% of total property transactions involved mainland funds, down from 28% in the first half of the year.
Uncertainties arising from the escalation of trade friction between China and the United States, slow the rise of trading volumes and capital values in office and warehouse buildings, the company pointed. Class A office capital rose only 2.7% in the second half of the year, after rising 10.8% in the first half.
Investors are wait-and-see under the effect from dim economic outlook and negative factor of interest rate increases, so it is expected the transactions value of industrial and commercial property this year will drop, Managing Director of Jones Lang LaSalle, Zeng Huangping expressed. Investment demand from the mainland will remain weak because economic growth on the mainland has slowed and capital outflows was controlled, so the capital cost of Class A office building estimated to fall 5% to 10% this year.
Rents continue to far exceed than that in other cities of the world.
Hong Kong's central office rents had topped the global rankings for four consecutive years, according report from Jones Lang LaSalle. The cost of renting office space in Central office building, including rent, taxes and services, is 60% higher than in central New York and nearly 75% higher than in the west end，also far exceeds large cities like Beijing, Tokyo, Shanghai and Shenzhen.
The rent cost in Central was really high because mainland companies expand aggressively in Hong Kong and renting Class A office, however, the related demand for Class A office building in Central has fallen in the past quarter, the Head of Research of Jones Lang LaSalle Hong Kong, Ma Anping expressed. This has led some companies to seek more affordable office space in non-core areas instead.