Hong Kong Grade A office leasing volume up 32% to 1m sq ft in Q3

There was a significant level of activity in Kowloon East.

According to CBRE data, leasing volume in Hong Kong’s Grade A office market increased by 32% q-o-q in Q3 2023 to 1.0 million sq. ft. which was broadly on par with Q1 2023. 

Leasing activity continued to be driven mainly by relocation and consolidation demand.

Here’s more from CBRE:

Net absorption turned positive in Q3 2023, registering 166,700 sq. ft. Greater Central and Hong Kong East registered noticeable declines in occupancy, but Kowloon East saw an increase in occupancy due partly to some forced relocation activities in Kowloon Bay.

The absence of new supply and overall positive net absorption ensured citywide vacancy edged down 0.2-ppt to 15.8%. Total vacant space remained high at 13.6 million sq. ft.

Limited demand and persistently high vacancy saw rents drop a further 1.4% q-o-q, accelerating from the 0.5% drop in Q2 2023 and marking the 18th consecutive quarterly decline. Core Central rents experienced the sharpest fall, dropping by 1.4% q-o-q after staying largely flat in Q2 2023. 

Rents in Tsim Sha Tsui and Kowloon East logged marginal increases of 0.2% q-o-q and 0.3% q-o-q, respectively, as new leases were signed in selected buildings and landlords of other properties held off from implementing further rental reductions. 

Ada Fung, Executive Director, Head of Advisory & Transaction Services – Office Services, CBRE Hong Kong: “Office leasing demand has picked up slightly from Q2 2023, with a noticeable level of activity found in Kowloon East where some buildings captured the demand from occupiers relocating out of KITEC for the site’s up and coming redevelopment plan. Yet the overall vacancy stabilised at approx. 16% despite the positive net absorption in the quarter. Cost saving was still the key objective, with some office occupiers strategically searching for fully-fitted office space to minimise CapEx during their moves. Public entities were relatively active with MTR and Hospital Authority backing some of the larger transactions during the quarter.”