Hong Kong Grade A office vacancy hits record high of 14.1% in Q3

The total vacant space reached 11.9m sq ft of vacant space during the quarter.

According to a CBRE report, gross leasing volume in Hong Kong’s Grade A office market fell by 8.8% quarter-on-quarter to 901,400 sq. ft. in Q3 2022 as expansionary demand remained soft amid heightened economic uncertainty. 

This brought the year-to-date leasing volume to 3 million sq. ft., a decline of 12.1% year-on-year. Leasing activity this quarter continued to be driven by relocations.

Here’s more from CBRE:

This period saw the addition of 1.8 million sq. ft. of new office space, the most in a quarter since Q3 2008. Despite the new completions, limited pre-commitments in the buildings ensured net absorption remained in the negative region. The contraction, however, slowed to 51,400 sq. ft. Except for Greater Central and Tsim Sha Tsui, which registered a positive net absorption of 33,700 sq. ft. and 14,100 sq. ft. respectively, negative net absorption was registered in other major submarkets.

New supply pushed up overall vacancy to another all-time high of 11.9 million sq. ft., with the vacancy rate rising 2 percentage points to 14.1%. While vacancy in Kowloon East surpassed 20%, the highest since Q1 2010, that in Greater Central edged down 0.15 percentage points to 8.1%.

Higher vacancy ensured overall rents fell by 1.0% quarter-on-quarter, a faster rate of decline than the previous two quarters. The year-to-date fall now stands at 2%. No major submarkets reported rental growth this quarter.

 Ada Fung, Executive Director, Head of Advisory & Transaction Services – Office Services, CBRE Hong Kong: “The office market has been weakened with declines in both quarter-on-quarter gross leasing volume and rents due to the economic uncertainty and higher vacancy, respectively. Space availability continued to escalate, following the addition of new office space. This provides tremendous opportunities for corporate occupiers who want to make flight-to-quality moves. Office leasing momentum is expected to gradually improve in Q4 2022 in Hong Kong as the normal flow of international people resumes. Grade A office rents are expected to remain broadly stable for the remainder of the year, but pressure from new supply will likely prevent rents from recovering in the next 12 months.”