Kowloon office rents drop for the third straight month in April

Rents declined by 1.7% to HK$22.8 per sq ft.

According to a Knight Frank report, office leasing momentum remained downbeat in the Kowloon market. In April, the average monthly rent dropped 1.7% MoM to HK$22.8 per sq ft, marking the third consecutive month of declines. 

Although the extent of the rental drop on a monthly basis appeared to be trivial, edging down by 1.6% MoM in January, 2.1% MoM in February, and 2.2% MoM in March, altogether, there was a significant 7.6% YTD decline. 

Here’s more from Knight Frank:

Deals were dominated by small transactions with an average size of 3,000 sq ft or below. Leasing was more active in Kowloon East, with relocation being the key demand driver in April.

Despite the soft market sentiment, some notable new leasing cases supported market activity during the month. Bela Offices, a co-working space operator, took We-Work’s existing office space of 29,735 sq ft with fitting out in Two Harbour Square; and Yusen Logistics moved from Kwai Chung to rent a 26,000 sq ft office at 83 King Lam Street, a brand-new Grade A office with competitive rent in Cheung Sha Wan. 

With market uncertainty likely to linger, tenants are expected to maintain a conservative stance. We believe office properties that offer cost-saving capex subsidies and attractive rents can distinguish themselves from the competition. Overall, we expect the Kowloon office market to remain challenging in the near term amid oversupply and weak demand.