Hong Kong’s emerging office demand to boost absorption in H2 2022

Leasing activity in the office market has improved substantially since April, and the decline in Grade A office rent has recovered

Hong Kong’s premium office market saw a 12 percent vacancy rate in June, the highest in almost two decades. The reason for this trend is that more companies are adopting work-from-home arrangements and cost-cutting measures to cope with the economic crisis.

The South China Morning Post reported that there is currently 9.8 million sq ft of empty Grade A space in the city.

Kowloon East had the highest vacancy rate with 14.6 percent. Other office districts that saw double-digit vacancy rates include Hong Kong East, Wan Chai, and Tsim Sha Tsui. 

It is anticipated that there will be an influx of 3.7 million sq ft of new office supply in the latter half of the year. This will be a massive rise from last year’s 576,200 sq ft, according to Macau Business.

Leasing activity in the office market has improved substantially since April, and the decline in Grade A office rent has recovered, with a QoQ of 0.8 percent.

More: Hong Kong also ranked fifth in an annual global ranking of the world’s most competitive countries and regions

From their peak in April 2019, Hong Kong’s office rents have gone down by more than 27 percent, especially in the core CBD areas occupied primarily by banks and financial institutions. Tenants have also continued to seek properties in non-core areas due to expansion and cost-saving opportunities. 

Rents are expected to decline by one to two percent during the second half of the year while core CBD districts are expected to lead the recovery.

The banking and financial sector occupied 29 percent of the floor area, leading leasing transactions, followed by professional services and real estate, with 17.5 percent.

The healthcare and medical aesthetics sector is catching up, as it has been observed that it took 5.2 percent of the newly leased space in Q2 2022. There had also been substantial growth in serviced offices and co-working space operators. 

“We believe this new emerging demand will boost absorption of the new upcoming supply, while we expect overall availability to reach 16 percent to 17 percent by the end of this year,” said John Siu, managing director and head of Project and Occupier Services, Hong Kong at Cushman & Wakefield.

The Property Report editors wrote this article. For more information, email: [email protected].