Hong Kong office rents to decline by 5-10% this year

Landlords will continue to be competitive as high vacancy rates persist.

According to CBRE, Hong Kong office leasing activity was mainly driven by relocation and consolidation demand throughout 2023. 

Leasing momentum pulled back to its usual seasonally slow momentum in Q4 2023, with gross leasing volume falling by 39% q-o-q to 754,000 sq. ft, according to CBRE data. This brought full-year leasing volume up to 4 million sq. ft., representing a growth of 8.7% y-o-y.

Here’s more from CBRE:

Thanks to some forced relocation and upgrading demand from some non-Grade A buildings in Kowloon, full-year net absorption stayed positive for a second consecutive year, reaching 216,000 sq. ft. In Q4, net absorption registered 318,600 sq. ft. as contributed by a series of deals in Kowloon and earlier pre-commitments to the newly completed 83 King Lam Street in Cheung Sha Wan.

Despite delays to a few new projects, slow pre-leasing activity in the 1.3 million sq. ft. of new supply added in 2023 ensured vacancy reached a record high of 14.3 million sq. ft. by the year’s end. Overall vacancy rose to an all-time high of 16.4%, growing by 1.1-ppt over the 12 months.

The vacancy overhang led to a 2.3% q-o-q fall in rents in Q4 2023, bringing the full-year decline to 6.0%. 

Ada Fung, Executive Director, Head of Advisory & Transaction Services – Office Services, CBRE Hong Kong: “The office market posted moderate growth in new leasing volume with vacancy rising to another all-time high. Although there were some upgrading activities in Kowloon, cost saving was still the main theme for the year. Fully-fitted office space was sought after as relocating tenants sought to minimise CapEx. For 2024, we expect Hong Kong’s financial markets to recover and support a mild growth in office demand. Companies, however, will remain largely cost-sensitive. High vacancy will ensure landlords to remain competitive and leasing will continue to favour tenants.  Citywide rents are expected to come down another 5%-10% in 2024.”