Co-Working office space demand in Hong Kong rising
According to JLL’s latest Hong Kong Monthly Market Monitor report, returning office stock arising from expiring leases led to a net withdrawal of 16,000 sq. ft in the Grade A office market in June 2017. Yet despite the contraction of the occupier market, the leasing activity remained robust, led by demand from co-working and serviced office operators seeking out expansion opportunities.
The last few months has seen an unprecedented amount of take-up from the co-working sector with both new entrants and traditional occupiers. “In a market where net demand growth has been thin, the arrival of co-working space operators represents a welcome source of new demand for the leasing market,” says Paul Yien, Regional Director of HK Markets at JLL.
The growing popularity of co-working offices in Hong Kong is not only being driven by start-ups but also increasingly by larger corporate occupiers looking to better utilize their real estate within the city; taking advantage of the greater flexibility, convenience and savings that can be provided by operators.
“As most Grade A offices in Central may be beyond the reach of the business models adopted by co-working space operators, the impact of these new market entrants will be felt more in Grade B offices and office markets outside of Central. Landlords may also consider bringing in co-sharing office operators into their portfolios to help broaden their tenant base,” Denis Ma, Head of Research at JLL, points out.
Beyond co-working space operators, PRC banking and finance firms continued to be the key drivers of leasing activity in Central, accounting for about 46% of all new lettings in terms of floor area. China RE Asset Management relocated and expanded in-house by 11,200 sq. ft at Three Exchange Square while a Mainland China investment company leased 10,800 sq. ft at 181 Queen’s Road Central.
Rents in Central advanced 0.3% m-o-m, surpassing the record highs set in 2008. Rents in all other major office markets remained broadly stable against tight vacancy rates.