Office vacancy rate on Hong Kong Island hits a record 12.2% in Q1

Meanwhile, rents dipped by 0.5% during the quarter.

In a recent report, Knight Frank said the Hong Kong Island Grade A office market continued to face weak demand amid economic uncertainty. In Q1 2024, the overall rent on Hong Kong Island slipped by 0.5% QoQ. 

“The overall vacancy rate on Hong Kong Island hovered at a record high of 12.2%, boosted by a 0.7% increase QoQ. Central experienced the most significant rental decline among the major submarkets, with the overall rent dropping by 1.7%,” the report said.

Here’s more from Knight Frank:

During March, leasing demand was driven mainly by Chinese mainland companies. A handful of upgrading cases were recorded over the month, further intensifying the flight-to-quality trend. For example, Golden MediTech moved from Bank of China Tower to The Henderson with a floor space of about 6,000 sq ft. Brilliance China Automotive Holdings also leased approximately 6,300 sq ft in The Henderson. 

As office landlords are pressured by the prevailing record-high vacancies, they are compelled to offer more flexible leasing packages and incentives, such as a fit-out allowance and free amenities, to drive tenancy deals. 

Despite the present lack of new demand, in the long run, we expect the office market to benefit from the Hong Kong government’s initiatives. More family offices and capital investments will be attracted to Hong Kong via the New Capital Investment Entrant Scheme. In addition to boosting investment activity, we believe these initiatives will generate additional demand for office leasing.