19/4/2016

Market Update Summary - 1st Quarter 2016

Market Update Summary - 1st Quarter 2016

Capped by a tight vacancy environment, leasing activity remained subdued with the total number of new lettings dropping 5% m-o-m to 36 transactions in March, about 35% below the monthly level recorded in 2015.

Coupled with expiring leases, all major office submarkets with the exception of Hong Kong East recorded net withdrawals, leading the overall occupier market to contract by 26,600 sqft, its worse performance in four months. In Hong Kong East, the vacancy rate dipped below 1.0%, largely supported by the Government’s lease of a whole floor at AIA Tower in North Point.

In Central, rents climbed 1.0% m-o-m in March, boosted by increases at the top-end of the market. Spot rents at AIA Central spiked up by over 15% after a handful of transactions in the building were completed at rentals in excess of HKD 150 per sq ft per month.

Investment volumes in Central accounted for about 60% of all transactions in March, as investors continued to eye office properties in the submarket to ride the rental recovery. Notable transactions included the sale of a whole floor at Lippo Centre Tower 1 in Admiralty for HKD 372 million (HKD 24,826 per sq ft) via equity transfer.

•In the primary sales market, Billion Development has sold 15% of the 91,600 sq ft office portion made available for sale at 3 Tai Yau Street in San Po Kong since being launched the previous month, achieving prices in the range of HKD 9,200–11,800 per sq ft.

The Planning Department has submitted three proposals to the Government on the redevelopment of two government sites at Sai Yee Street in Mongkok. Adjacent to the Mongkok East MTR station, the sites could potentially provide about 1.3 million sq ft (gross) of commercial/office space. However, demolition works are not expected to be completed until the end of 2020.

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