Grade A office rents on Hong Kong Island to decline by 3-5% in 2024

The overall vacancy rate was at 12.3% as of May 2024.

In a report, Knight Frank revealed that the Hong Kong office sector continues to face challenges and grapple with declining rents and rising vacancies. 

“With limited new demand and weak market sentiment, the overall rents of Hong Kong Island dropped by 2% year-to-date as of May 2024, while the overall vacancy rate reaching a high level of 12.3%. Among all submarkets, the Central district witnessed a significant reduction in rent, with a 3.4% year-to-date decline,” said Wendy Lau, Knight Frank’s Executive Director and Head of Hong Kong Office Strategy & Solutions.

Here’s more from Knight Frank:

On a positive note, we have seen the return of Chinese mainland companies, with continued inquiries and new demand for small and medium-sized quality office space below 5,000 sq ft. Furthermore, there have been a handful of expansion cases involving foreign financial institutions despite the overall weak performance of the financial sector.

The recentralisation and flight-to-quality trends persisted, as occupiers seized the opportunity from falling rents for office or location upgrades. More tenants focus on new development for relocation, driving landlords of new development to increasingly recognise the importance of providing elevated amenities, such as conference and event spaces, collaborative areas, and gyms to attract tenants.

In the absence of any encouraging catalysts, we expect office lease demand to remain subdued in 2H 2024 given the current conditions of local and worldwide economies. As rent continued to fall in prime districts, we expect the overall Grade-A office rent on Hong Kong Island to fall by 3% to 5% for the whole year.