Commercial Real Estate Market Trends in 2018

Benefited by the government policy and infrastructure facilities, the Greater Bay Area is very likely to become the world’s biggest bay area economy. Backed by the country’s Belt and Road Initiatives and the completion of numerous large-scale infrastructure projects, more professional labours, capital, importing and exporting activities are brought to the Asia hub. These elements attract multinational companies such as banks, accounting firms, law partnerships, middle and back offices to the station in the Greater Bay area and flourish in the real estate market.



Among all real estate categories, grade A office will continue to be the focus. Guangzhou, Shenzhen and Hong Kong will become the centre of headquarters of the world’s largest companies.



However, all the cities face the same challenge of high demand and a limited supply of grade A offices. For example, in July 2018, the Grade A office vacancy rate of Hong Kong has dropped to a historic low at 1.5%.  In order to satisfy the ever-growing demand of first-class office space, Guangzhou, Shenzhen and Hong Kong have implemented various policies to decentralise companies from central areas to cheaper locales.  For example, the eastern district in Hong Kong has become a popular area for low cost while high-class office buildings - Quarry Bay, North Point.

The Centre, one of the most expensive office building in Central

Hong Kong’s grade A office rents once again ranked number 1 in the world with the average price of HKD120.7 per sq. ft. in Central district. Despite the continuous growth of office rents in Central, the office rent of non-CBD (Central business district) maintain its stability.



In recent years, there are cases which tenants relocated their offices to Causeway Bay and Tsim Sha Tsui from Central. Plenty of investment bank’s back offices and law firms have been or will be moved out from Central, for instance, Goldman Sach’s back offices will be relocated from The Centre, one of the most expensive office building in Central to Lee Garden Three in Causeway Bay, JPMorgan is relocating to Kung Tong, Baker McKenzie, a multinational law firm is moving to Taikoo Place. Such decisions are evidently relatively cost saving for tenants because there is 2 to 4 times difference in rents between the prime area and non-CBD according to Treasure Land Property Consultants Limited’s Rental Report.



Meanwhile, the prevailing trend of shared offices in Wan Chai District accelerated the take-up rate of rental offices. With such active market activities, the future office rental business in Hong Kong is absolutely bright and positive.