Weak leasing demand pushed up overall vacancy by a further 0.3pp q-o-q to 6.9% in Q4 2019, the highest year-end figure recorded since 2009. Rents declined by -3.5% y-o-y over the course of 2019 after an increase of 6.7% y-o-y in 2018.
Higher vacancy resulted in sharper rental declines in most submarkets. All key submarkets, except for Hong Kong East and Kowloon Others, registered negative rental growth for full-year 2019.
Leasing demand from Chinese companies and agile workplace operators was virtually non-existent in Q4 2019. Sources of demand included investment funds, medical centre operators and local insurance companies, all of which sought to capitalise on landlords’ less aggressive terms.
CBRE expects rents in core submarkets and Kowloon East to fall by 5% to 10% in 2020. Rents in Hong Kong East will be resilient in 2020 (up 0% to 5%) as decentralisation demand is set to hold firm.