Hong Kong Grade A office rents to decline by at least 2% this year

2024 is anticipated to be a tenant-driven market.

Against the backdrop of a slow economic growth and interest rate hikes, corporates in Hong Kong prioritised cost saving over expansion throughout 2023. Amongst all industries, insurance was the most outperforming sector, supporting the rental market in Tsim Sha Tsui, which is the only submarket witnessed annual rental growth. 

According to Colliers data, overall Grade A office rents dropped to HKD 52.9 per sq. ft. in Q4 2023 (–2.3% QoQ and –6.5% YoY). The Central Business District (CBD) experienced a significant rental drop with the Central / Admiralty submarket dropped to HKD 93.1 per sq. ft. (–2.4% QoQ and –8.2% YoY) in Q4 2023. Given a large quantity of new supply in Q4 2023 with low pre-commitments, the YoY net take-up of 2023 is –976,000 sq. ft., while vacancy rate is pushed to a record high of 15.9%, an increase of one percentage point (pp) QoQ. 

In 2024, Colliers expects a tenant-driven market thanks to the vast options from current and new supplies. Fiona Ngan, Head of Occupier Services at Colliers Hong Kong, said a weak rental trend will remain in place in H1 2024 as tenants are inclined towards taking a wait-and-see approach. 

“The demand will be supported both by the technology, media, and telecommunications (TMT) and insurance sectors. Meanwhile, occupiers with sufficient budgets have the option to move to superior quality buildings, taking an advantage for flight-for-quality from the CBD fringe to the CBD. We anticipate Grade A office rental levels to remain under pressure with a drop of at least 2% in 2024,” Ngan added.