Grade A office rents slips by almost 1% in Q1 2022

Cushman & Wakefield linked this to the fifth wave of the pandemic.

The overall rental level of Grade A office declined by less than 1% in the first quarter of 2022 after the fifth wave of the pandemic dampened the recovery of leasing activities.

Office markets rent slowed down, leading to a 0.9% quarter-on-quarter and 3.1% year-on-year drop, Cushman & Wakefield reported.

The office leasing market is expected to regain momentum in the second half of the year as the outbreak winds down.

“We estimate a total net absorption of 300,000 to 500,000 square feet in 2022, with the banking & finance sector leading demand for office space, whilst the professional services and logistics sectors will also remain active,” John Siu, Managing Director and Head of Project & Occupier Services, Hong Kong, Cushman & Wakefield, said.

Retail leasing, meanwhile, is expected to also recover in the second quarter of the year after it saw a 3% QoQ decline.

This was driven by the record-low drop in local retail sales in the first two months of the year due to the outbreak. But this is seen improving through the rollout of the consumption vouchers and the easing of social distancing measures.

“Retail vacancy rates in key districts have been impacted by the pandemic to different extents. Mongkok and Tsimshatsui have suffered the most, with vacancy rates at 16.4% and 14.3% respectively,” Kevin Lam, Executive Director and Head of Retail Services, Agency and Management, Hong Kong, Cushman & Wakefield, said.

Lam identified three different approaches landlords took in response to the pandemic with the first group having preference to leave the space idle, pending quality long-term tenants.

The second group tended to take a lease term of two to three years from large reputable brands; whilst the third group ought to lease the space to short-term tenants, such as those selling face masks and anti-epidemic products.

“In fact, short-term leases are better received by tenants, and so some landlords are willing to follow such market trends and accommodate lease terms accordingly,” he said.