Hong Kong to see 4m sq ft of new office spaces this year

Rents will remain under pressure with a 15% decline expected over 2022.

In a recent report, Savills says Hong Kong will see 4.0 million sq ft of new office supply in 2022, only 120,000 sq ft net of which has been precommitted. This is on top of the existing 6.0 million sq ft net of vacancy (four years of average take-up). Savills warns that rents will remain under pressure. 

“We currently anticipate a fall of 10% to 15% over the year as a whole, bringing the peak-to-trough rental decline to 40% by year-end 2022. Kowloon East will see particularly elevated levels of vacancy, currently at 1.9 million sq ft, followed by Central and Wanchai/Causeway Bay,” the analyst said.

Here’s more from Savills:

Most of 2022’s supply will come on stream in decentralised and fringe markets and of the nine projects anticipated, only two have so far secured anchor tenants (The Henderson in Central and Two Taikoo Place in Island East). Securing a good covenant as a first commitment is important in order to benchmark rents, but also to define the tenant mix and establish a building’s branding and market profile. A multi-fl oor commitment is ideal. 

We have initiated coverage of a new business node, Island South, which covers both Wong Chuk Hang and Cyberport. This emerging decentralized area has become a popular choice for relocations recently, with its competitive rents (lower than Kowloon West and comparable to Kowloon East), Hong Kong Island address and convenient commute since the opening of the South Island Line in December 2016. 

Nevertheless, the pool of only 2.4 million sq ft net of Grade A stock in the district means relocating tenants face a limited choice. The completion of the 200,000-sq ft Landmark South next year may provide more high quality options in this niche market.