Kowloon office rents to decline by 2-4% over 2025

Analysts believe the market has yet to reach its bottom.

The Kowloon office leasing market is facing a complex landscape that lacks sustainable demand drivers. According to Knight Frank, overall leasing sentiment remains weak.

“Most leasing activity has been related to relocation and cost-cutting, primarily involving small offices of under 3,000 sq ft, with rents at HK$20 per sq ft or lower,” the analyst said.

Here’s more from Knight Frank:

There has been some activity from religious organizations and educational institutions during the month, but these instances were not substantial enough to sustain the market. For example, a Christian church leased 32,974 sq ft at 83 King Lam Street in Cheung Sha Wan, and HKUST leased 31,378 sq ft at Manulife Financial Centre in Kwun Tong.

Additionally, Build King, an infrastructure company, took half floor at Stelux House in San Po Kong. These policy-driven demand creates temporary leasing demand, but this will not be sustainable in the long term.

An abundance of secondary office space has accumulated as tenants relocate and downsize, resulting in a significant excess of supply. We expect rents continue to face a lot of pressure due to the growing imbalance between supply and demand, especially with an anticipated addition of 1 million sq ft of new supply to be delivered in 2025. We believe the office market has not yet reached its bottom, and rents are projected to decline by another 2% to 4% over 2025.