A pedestrian using a smartphone is silhouetted as buildings stand in the background in the Central district of Hong Kong, Nov 3, 2019. (CHAN LONG HEI / BLOOMBERG)

Hong Kong’s office leasing market has gradually recovered as Grade-A office rentals declined at a slow pace and are expected to stabilize in the second half of the year, Cushman & Wakefield said.

The second quarter saw a 0.8 percent drop quarter-on-quarter in Grade A office rentals, slightly up compared with the 0.9 percent decrease quarter-on-quarter in the first three months of 2022.

John Siu Leung-fai, managing director and head of project and occupier services for Cushman & Wakefield Hong Kong, expected the year-round rental to stabilize between negative 3 to negative 2 percent.

John Siu Leung-fai, managing director and head of project and occupier services for Cushman & Wakefield Hong Kong, expected the year-round rental to stabilize between negative 3 to negative 2 percent

The average rent per square foot in Hong Kong declined slightly to HK$55.1 ($7.02) in the second quarter of this year, compared to HK$55.6 in the first quarter. Siu forecasted a rental cut in a range of 1 to 2 percent in the second half of 2022.

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The net absorption of Grade-A offices recorded a mild negative in the second quarter after positive net absorption in the previous three consecutive quarters. Net absorption is the difference in office space vacated and the space claimed by other businesses.

The real estate services giant said the negative figure was due to the increasing expired or expiring leasing contracts. The Grade-A office availability rate edged up by 0.2 percentage points quarter-on-quarter to 13.8 percent.

“The banking and financial sector took the lead in terms of new leasing transactions sealed in the second quarter, followed by professional services and property sectors”, Siu said.

“As an increasing number of people attach great importance to health during the pandemic, we have observed a sizeable number of new transactions conducted by the healthcare and medical aesthetics sector, accounting for 5.2 percent of the newly leased space in the second quarter,” Siu said.

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Kevin Lam Ying-wai, executive director and head of retail services of Cushman & Wakefield, echoed Siu’s sentiments. “The trend of consumption in health and lifestyle will not be a short-term phenomenon,” he said. “Lifestyle products, wellness and sports sectors, such as indoor climbing centers, have continued to become a driving force of the retail market.”

With the pandemic easing, retail rents in major districts have generally stabilized, with Central and Mong Kok rising by 0.1 percent quarter-on-quarter and 0.6 percent quarter-on-quarter, Lam said.

Lam also said that food and beverage operators have expanded proactively in the quarter with the second batch of HK$5,000 consumption vouchers to be disbursed in August.

With the Hong Kong government led by new Chief Executive John Lee Ka-chiu easing overseas travel curbs and making efforts to open the border with the Chinese mainland, Lam remains upbeat about Hong Kong’s retail market.

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“We expect overall retail and food and beverage rents to rise between 1 percent and 5 percent in the second half of this year,” he said.

tianyuanzhang@chinadailyhk.com