Kowloon office market demand to remain weak in the near term

The average office size leased declined by 3% to 5,700sq ft in January.

The Kowloon office market exhibited subdued activity in January 2025 according to Knight Frank, largely due to the festive season. Although new lease transactions rose by 30% MoM, this was primarily due to a low base from December.

“The average office size leased dropped by 3% MoM to 5,700 sq ft, as most new leases were secured by small and medium enterprises. Average rent fell by 1.7% MoM to $22.6 per sq ft/ net,” data from Knight Frank revealed.

Here’s more from Knight Frank:

Most market activity focused on lease renewals, especially in Kowloon East. Notable renewals included Chong Hing Bank, which expanded 34,326 sq ft at Enterprise Square 5 in Kowloon Bay; CTBC Bank renewing 27,475 sq ft at Manhattan Place in Kowloon Bay; Far East Façade, an international façade contractor, also renewed 20,000 sq ft at Eastcore in Kwun Tong.

The lack of notable new lettings suggests that many businesses postponed relocation decisions during the festive season. Some larger deals, exceeding 10,000 sq ft, are still in negotiations, indicating a potential uptick in the new letting activity post-festival.

On the other hand, some companies are opting to renew existing leases, often downsizing their spaces by 10% to 15% to align with current operational needs. This trend is particularly evident in manufacturing, trading, and sourcing sectors as businesses optimize workflows and reduce staff requirements.

Overall, we expect demand in the Kowloon office market to remain weak in the near term. Nonetheless, with projections of less than 1 million sq ft of new office supply within 2025, it may lead to a faster net take-up rate, suggesting rents are unlikely to decline significantly in 2025.