Hong Kong office net absorption finally rebounds after two years

Overall net absorption hit 70,900 sq feet in Q3 2021.

Rental correction in Hong Kong’s office market decelerated in Q3 2021 as overall rent edged down by 0.3% QOQ, compared to the drop of 1.6% QOQ in the previous quarter. According to Colliers, some submarkets even started to see rental rebound – rent in Central/Admiralty slightly rebounded by 0.3% QOQ, the first quarter with positive rental performance since Q2 2019. 

Tsim Sha Tsui also recorded a 1.4% QOQ rental rebound, mainly driven by leasing demand from co-working operators and occupiers from Hong Kong Island and within the Kowloon side with relocation needs. 

With the launch of both the cross-boundary Wealth Management Connect Scheme and the Come2HK Scheme in September, it should drive long-term leasing demand further, and pave the way for cross-border business travels.

“Amid the current tenants’ market, decentralisation remains a key trend, and landlords should look to upgrade their properties to remain competitive when new office supply comes online from 2022 onwards. For occupiers, the timing is right to seek flight-for-quality options while rents are still attractive,” said Chris Currie, Head of Occupier Services in Hong Kong.

Here’s more from Colliers:

In Q3 2021, the office leasing demand further improved while the business sentiment and domestic economy continue to recover. Overall net absorption rebounded to 70,900 sq feet (0.8 mil sq meter), the first positive quarter since Q3 2019, bringing the overall vacancy rate to 10.4%. The positive net absorption was mainly focused on Kowloon side, including Tsim Sha Tsui and Kowlooon East, while cost-optimization and decentralization remains popular options among occupiers.

The improving sentiment is also witnessed around the CBD area, wherein Central’s vacancy rate dropped for two consecutive quarters from 7.6% in Q1 to 7.2% in Q3 2021. Tenants including mainland financial companies, law firms and flexible workspace operators were taking the opportunity to recentralize, or expand, while rents remained attractive in Central.  

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