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Wednesday, October 19, 2016, 19:35

Central office rentals propped up by mainland firms

By Luo Weiteng

Chinese mainland financial institutions underpinned the office leasing market in Hong Kong’s Central district in September, according to a study by real estate management firm Jones Lang LaSalle (JLL).

It showed about 70 percent of new lettings in the district — in terms of floor area leased — were from mainland financial institutions. These included China Bohai Bank, which expanded its offices at Two IFC. Shanghai Pudong Development Bank leased 11,200 square feet at One Pacific Place in Admiralty for its new investment banking arm.

“There is strong, unsatisfied demand at the pointy end of the Grade-A market and it is almost entirely coming from Chinese mainland financial institutions,” said Alex Barnes, head of Hong Kong markets at JLL.

Barnes said that despite well-reported headcount cuts in the banking industry, it has not yet translated to growing office vacancies.

“This is yet to be realized in physical vacancy, in part due to the appetite of mainland demand for much of the space that may otherwise become vacant,” Barnes said.

Banking on the growth in the mid-range market, office rents in Central grew 1 percent to HK$109.8 per square feet in September, compared to August.

“While the rise of mainland demand has been a positive for the market, it also emphasizes how far demand in the broader market has tailed off,” said Denis Ma, head of research at JLL. “Coupled with the completion of new supply, we still hold the view that the rental market is nearing an inflection point.”

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