Grade A office rents on Hong Kong Island down 6.5% in August

And vacancy remained high at 13.4%.

According to Knight Frank, Hong Kong office leasing momentum remained lacklustre amid weak market sentiment in August. The overall Grade A office rent on Hong Kong island continued to decline to HK$62.6 per sq ft in August, decreasing by 6.5% YoY and 3% YTD. 

Here’s more from Knight Frank:

Among the major submarkets, Central, Admiralty and North Point recorded a larger rental decline of -5.8%, -6.0% and -9.7% YTD, respectively. The overall vacancy rate for Grade A offices remained at a high level of 13.4%. 

The slow economic growth and property market downturn in Hong Kong has significantly impacted local legal firms and the stock market. Several local law firms, particularly those specialising in conveyancing, IPOs and local securities firms, have scaled back their operations due to the challenging economic environment. Landlords are much more flexible in rental concessions and negotiations to attract and retain tenants. 

Despite these challenges, we saw new hedge funds set up in the market, driving new demand for office space below 5,000 sq ft. Recently, a local hedge fund leased the whole 9th floor (5,700 sq ft) of LHT Tower. The resiliency and growth of hedge funds is expected to drive some leasing activity in the coming months. 

In the near term, we expect the office leasing market to remain downbeat. We maintain our rental forecast of a 3% to 5% drop in 2024.