Kowloon office transaction volume up 4.4% in March

Most of the transactions were for units under 3,000sq ft.

In a recent report, Knight Frank revealed that the Kowloon office market showed positive activity in March, contrasting with the quiet market environment in the first two months of 2025. Transaction volume experienced a 4.4% MoM increase.

“While transactions primarily involve units below 3,000 sq ft, sizable transactions of over 10,000 sq ft increased by 10% in number. Following two subdued months leading up to the fiscal year-end in March, companies expedited their decisionmaking, resulting in an increase in transaction volume,” the report said.

Here’s more from Knight Frank:

The dominant sources driving leasing activity remain electronics and IT-related companies. Office spaces in Kowloon East commanding rents at or below HK$20 per sq ft also contribute significantly to the market transactions.

Amid the uncertainty surrounding tariff implementation, the market has observed two distinct responses. Large corporates are likely to secure longer lease terms to reduce risk exposure to the market while seeking flexibility in size and other terms.

Conversely, some companies are favouring short-term renewals to capitalise on the benefits of flexibility and risk reduction. For example, an apparel-making company renewed for 6 months, while a US electronics company opted for an 18-month lease.

In conclusion, leasing activity in the Kowloon office market during Q1 2025 indicated that flexibility and cost remained the primary concerns for tenants. Global trading uncertainty has affected market sentiment. As a result, companies have expedited leasing decisions to reduce market risk exposure. Leasing demand from mainland Chinese companies has nearly frozen.

The adverse effects of tariffs on the sourcing, trading, and retail industries are expected to become more pronounced in the second quarter. We expect Grade A office rents in Kowloon to remain under pressure in the short term due to the negative market outlook and uncertainty surrounding tariffs.