Law firms slowly abandoning offices in CBDs

Rents ranging from $80-$150 becoming unbearable.

According to Jones LaSalle, only 7% of the Central market are occupied by law firms while there are only 2 law firms occupying more than 5,000 square meters reflecting conservative budgeting amidst higher rent costs. 

Here's from Jones Lang LaSalle:

Law firms have traditionally been located in core Central across the older buildings within the Hongkong Land portfolio (largest Central landlord). Ease of access to major banking clients (for corporate practices) scattered around the Central walkway is a key consideration to location.

As the legal market has grown, firms have spread to the periphery of greater Central, to Admiralty and Sheung Wan, which are a short distance to the traditional core.

Law firms with a conservative budget continue to take up premises in buildings located in Central’s periphery, where rents are more cost effective. The legal sector has been actively growing over the past 24 months with new entrants and existing firms growing considerably. Operating costs for Hong Kong law firms are increasing as real estate overheads inflate with employment costs.

At the same time there has been a significant drop off in IPO and corporate work.

For those firms seeking to relocate, office options are limited as vacancy is still low, and the development pipeline remains constrained until at least 2016. Hong Kong law firms are first looking to densification as a natural cost saver, as traditional space utilisation has changed little in Hong Kong, comparative to other markets.

As there is little confirmed new supply in Central, it is likely that the high-end service sector will look further East on Hong Kong Island to lower cost districts that can satisfy business requirements. We see both Wan Chai and Causeway Bay as natural locations to fit this trend in the short term.
Rents are high, but have softened in recent months.

Forecasts predict further short-term decline, but overall growth in 2013. Firms would be prudent to position themselves in the market in Q4 2012 - Q1 2013, where possible, to capture what is likely to be a short-term bottom of the rental market.