Hong Kong office rents to drop by 5-10% for full-year 2024

Rents are expected to decline by up to 5% in Q4.

Consolidations and a preference for quality will continue to be the main themes in Hong Kong, according to a JLL report. In a tenant-friendly market, properties that feature high-end specifications, ESG credentials and attractive office amenities will continue to see interest from tenants.

“Weak external demand, along with short-term supply pressures, negatively impact landlord expectations for rent growth. Consequently, in Q4 2024, rents are expected to drop further to 0–5%, leading to a full-year drop of 5–10%,” the report added.

Here’s more from JLL:

Net absorption in Q3 2024 recorded 143,700 sq ft, mainly due to some sizable leasing transactions in decentralised locations. Cost consideration remains a primary factor, leading many tenants to prefer lease renewals, with an emphasis on higher-quality buildings.

One notable leasing transaction was concluded during the quarter: ICBC leased around 145,000 sq ft (GFA) of space at The Harbourfront One in Hung Hom, mainly relocating its operations from Kwun Tong.

No Grade A office project is completed in Q3 2024

The third quarter of 2024 saw no project completions.

The overall vacancy rate dipped slightly to 13.4% as of end-Sep, from 13.6% in Q2 2024. In particular, Hong Kong East’s vacancy rate dropped to 12.4%, but rose in Central and Wanchai / Causeway Bay to reach 12.2% and 10.3%, respectively.

Rent declines across all submarkets

Rents in the overall market declined 3.1% q-o-q in Q3 2024, with all submarkets registering declines. Notably, rents in Central continued to drop by 3.8%, while rents in Hong Kong East and Kowloon East dropped by 3.9% and 3.0%, respectively.

Amidst elevated financial costs and a weak rent outlook, capital values in the overall market dropped by 4.1% q-o-q in Q3 2024, while investment yields expanded marginally.