Kowloon office rents to decline by 1-3% in 2024

Rents in Kowloon East are forecast to drop by 3-5%.

Following a gradual pickup in leasing activity in July, a Knight Frank report revealed that Kowloon experienced a slowdown in activity in August due to the summer holiday period. European companies, in particular, delayed their real estate decision-making, resulting in a significant drop in leasing activity. 

“In August, the volume of new leasing transactions saw a MoM decrease of 13%. With limited new demand, the average monthly rent dropped slightly to HK$22.8 per sq ft. As key decisions are expected to resume after the summer holiday, leasing activity is expected to gradually pick up in September and October,” the report said.

Here’s more from Knight Frank:

Despite a quiet market, leasing activity from semi-retail tenants picked up during the month. One notable new leasing case was HKU Space, a postsecondary education institution, which leased a 23,593 sq ft office in Kingston International Centre in Kowloon Bay. 

Moreover, the trend of tenants seizing the opportunity presented by falling rents in centralised areas to upgrade their locations continued to prevail in the market. One notable example was the Industrial and Commercial Bank of China (ICBC), which relocated and expanded from a 135,000 sq ft office space in Millennium City 1 in Kwun Tong to a 165,000 sq ft office space in One Harbourfront in Hung Hom, including a canteen area. With ICBC moving out of Kwun Tong, this shift will exert additional pressure on landlords in Kowloon East, potentially leading to a ripple effect that drives down rents in the area. 

Overall, given the current condition of the local and global economy, more uncertainty is expected in the market towards the end of the year. Consequently, office rents in the Kowloon market are expected to experience a mild drop in the coming months, as tenants adopt a more conservative approach to the market outlook. 

We expect rents in Kowloon East to drop by 3-5% due to the ripple effect caused by the exit of ICBC from Kwun Tong, and the overall Kowloon market to drop by 1-3% for the full year of 2024.