Hong Kong to see over 2.8m sq ft of new offices in the next two years

Central and Quarry Bay will be the main locations for these new office spaces. 

Hong Kong has been seeing a ‘recentralisation’ trend with declining vacancy rates and increasing rents, as well as landlords eager to fill space. 

According to Wendy Lau, Knight Frank’s Executive Director and Head of Hong Kong Office Services, “The drop in Central office rent is starting to ease overall, with less than a 3% cumulative drop in the first 11 months of the year. In the new year, there is potential for Grade-A office rents on Hong Kong Island to go up by 5% to 10%, especially in Central, Admiralty and Wan Chai.”

Here’s more from Knight Frank:

Furthermore, there will be a new supply of over 2.8 million sq ft of office space on Hong Kong Island in the next two years. Most of this will be concentrated in Central and Quarry Bay. While the consensus is that the pandemic and work-from-home arrangements will affect the take-up of offices, Knight Frank’s global (Y)our Space Report has revealed that around 70% of Hong Kong enterprises are planning to increase their office footprint in the next three years. This demonstrates that office space remains equally significant to Hong Kong enterprises even during the pandemic.

Kowloon Office Market:

2021 has seen a slight recovery in demand for offices in Kowloon, with a 35.5% YOY increase in the number of newly signed lettings, suggesting a bottoming-out signal in the Kowloon market.

The rental level has seen support with demand returning slowly. Relocations are more driven by size optimisation, particularly since many companies are considering permanent work-from-home policies. These factors have mitigated the effects of the weak business atmosphere, resulting in a less significant downward adjustment in Kowloon than on Hong Kong Island.

Overall, office rent and vacancy in Kowloon have experienced a different trend to that of Hong Kong Island. In 2022, we expect to see a more stable market with a slight inclination towards favouring tenants. Landlords will continue to compete for quality tenants while the margin for negotiations is likely to narrow compared to this year.