Hong Kong Grade A office net absorption sees longest downcycle in history

Total net absorption was -162,000 sq ft in Q4 2021.

The final quarter of the year is normally a quiet period, and so office leasing momentum was understandably slow in Q4 2021. 

Nevertheless, CBRE says full-year volume rose 83% y-o-y to 4.1 million sq. ft., although this only represents 78% of 2019’s total. Banking, financial and insurance companies accounted for 25% of the full year’s new leasing activity.

Here’s more from CBRE:

Despite improved leasing momentum, net absorption registered -162,000 sq. ft. in Q4 2021, the ninth consecutive quarter of negative figures and making it the longest downcycle in history. Only Kowloon East registered full-year positive net absorption in 2021.

Overall vacancy rose by 1.3-ppt over the year from 9.9% in December 2020 to 11.2% in Q4 2021. Total vacant space reached 9.1 million sq. ft., the highest on record. Kowloon East was the only submarket to report lower vacancy (-0.5-ppt) compared with a year earlier. Of the submarkets reporting higher y-o-y vacancy, Greater Central (+0.3-ppt) saw the weakest rise.

Overall rents dropped by 1.1% q-o-q in Q4 2021, bringing the full-year rental decline to -7.3%, well below the -17.4% y-o-y recorded in 2020.

Ada Fung, Executive Director, Head of Advisory & Transaction Services – Office Services, CBRE Hong Kong: “Despite the uncertainties over the spread of the COVID-19 Omicron virus, office leasing momentum is expected to improve further assuming a partial resumption of cross-border travel with Mainland China. Hong Kong’s steady economic growth and improving leasing demand from Chinese firms will likely see rental decline to gradually slow down compared to 2021 but vacancy overhang and new supply boom will prevent office rents from a strong recovery. Grade A office rents are expected to remain largely stable throughout 2022. Submarkets with higher vacancy will see rents remaining in the negative region.”


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