Grade A office rents on Hong Kong Island down 2.6% YTD

North Point saw the steepest decline of 9.3%.

According to a recent Knight Frank report, market sentiment in July remained soft. Year to date (YTD) the average Grade A office rent on Hong Kong Island continued its decline, dropping to HK$62.8 per sq ft, down 2.6%. 

Among the major submarkets, Central, Admiralty and North Point recorded a greater rental decline of -4.1%, -6.0% and -9.3% YTD, respectively. The office vacancy rate on Hong Kong Island reached a record high of 13.5% amid weak leasing demand. 

Here’s more from Knight Frank:

Hong Kong’s legal sector has faced significant headwinds. Complicated geopolitics, a protracted capital market downturn and a slow economic recovery has taken a toll on the sector. According to The Law Society of Hong Kong there were 76 foreign law firms registered in Hong Kong in July, down by 21% from four years ago. In 1H2024, US law firm Winston & Strawn closed its office in Hong Kong after a 15-year presence. 

Despite the downsizing trend of foreign law firms and weak performance of finance sector, we have observed increasing demand for new Grade A office buildings. This is because the flight-to-quality trends persisted fuelled by lower rents. This upgrading of space is particularly prevalent with small to medium size office occupiers ranging from 3,000 sq ft to 6,000 sq ft. Lastly, we observed that fully fitted units are in great demand. 

The outlook for the office leasing market on Hong Kong Island remains challenging. The high vacancy rate and ample future supply will continue to weigh on Grade A office rents.