Deepening economic woes in Europe are taking a toll on Hong Kong's office sector, with prime rents in core business districts edging down at a time when multinational companies are downsizing and moving to cheaper premises.
Occupier demand for offices has weakened, particularly on Hong Kong Island, as local and foreign companies have put their expansion plans on hold. Retrenchment is especially serious in the financial and banking sector.
Office leasing sentiment has been subdued since the second half of last year. Cost reduction is now a catchphrase with news of lay-offs spreading in some retail banks and investment banks.
According to property consultants, a growing number of banks have decided to return office space through surrender or upon lease expiry. As a result, there has been a negative take-up of space, with Central being the hardest hit area. Rents there have been driven down over the past few months.
Thomas Lam, head of research for Greater China at Knight Frank, says the office leasing market continued to record low levels of activity at the start of the new year, as uncertainty in the global economy prevails and a number of financial institutions in Hong Kong face lay-off worries.
Only a handful of lease deals were recorded in Central in January, including a law firm's taking up of a mid-floor in Prosperity Tower and the lease of a 5,479 sqft low-floor space in Henley Building.
Data compiled by the property consultant shows that grade-A office rents in Hong Kong fell 1 per cent in January.
