Hong Kong Island to see around 3.5m sq ft of new office supply by 2025
Grade A office rents are likely to grow by up to 10% this year.
According to Knight Frank, the Grade A office market in Hong Kong Central has been seeing increased demand from several multinational corporations, especially those in the financial industry. Strong leasing demand supports further rental growth.
In contrast, rents in North Point and Wong Chuk Hang are under pressure due to the high vacancy rate. By 2025, Knight Frank estimates that approximately 3.5 million square feet of new office supply will be available in Hong Kong Island, mainly in Central and Quarry Bay,
“As Hong Kong’s pandemic situation stabilises, the economic sentiment is recovering, and leasing activity has regained momentum. Apart from North Point and Wong Chuk Hang, the overall Hong Kong Island market saw signs of bottoming-out. We expect office rents will rebound in 2H, with Grade A office rents to grow by 5-10% in 2022,” says Wendy Lau, Executive Director and Head of Hong Kong Office Strategy & Solutions.
Here’s more from Knight Frank:
The Kowloon Grade A office market demonstrated much stronger momentum since the easing of the fifth wave of the epidemic. New setups of Chinese mainland enterprises, relocations from Hong Kong Island and office upgrades are the major sources of new demand in Kowloon that fuelled the momentum.
Some multinational corporations (MNCs) have been actively seeking space for upgrades in premium buildings in emerging office hubs in Kowloon, in which 70% of them decided to adopt an agile working model as it can reduce office operating costs by up to 25%. This explains why demand focuses on large and sizeable Grade A offices such as the NCB Innovation Centre (previously known as 888 Lai Chi Kok Road) boasting high ceilings, wide interior span and an almost column-free layout, which all facilitate a better configuration of an agile workplace.
The small rental gap between the leading GBA cities and Kowloon is a pull factor to attract new setup companies from the GBA to choose Kowloon when they expand their footprints to Hong Kong market, or via Hong Kong to the international markets. We foresee more office leasing demands in Kowloon will be generated when the borders reopen.
With the fifth wave of COVID-19 pandemic under control, we expect rents to remain stable in the coming three to six months, and the overall Kowloon office rents to slightly increase by 0-1% this year.