Office rents on Hong Kong Island drop by 4.4% in December

The vacancy rate remained high at 12.9% during the month.

In a recent report, Knight Frank revealed that considering the subdued market sentiment and the restrained demand, the overall average rent on Hong Kong Island fell further to HK$64.1 per sq ft in December, marking a -0.9% month-on-month (MoM) and -4.4% year-on-year (YoY) drop.

“For the full-year 2024, North Point experienced the largest decline among major submarkets, with the overall average rent decreasing by 14.4%. Additionally, the office vacancy rate on Hong Kong Island remained high at 12.9% in December, reflecting a slight decrease of 0.06% from November,” the report said.

Here’s more from Knight Frank:

Despite December traditionally being a quiet month for office leasing transactions, Central district showed signs of increased activity, particularly regarding new developments. For instance, the committed leased space of a new development in Central increased to 76% in December compared to 65% in November.

There has been a noticeable increase in leasing interest from hedge funds during the month and over Q4, with several hedge funds taking advantage of declining rents to secure expansion space and lease new premises in premium Grade A offices. It is also understood that a number of global hedge funds entered the market with the view to lease office premises, indicating confidence in Hong Kong within the sector.

Overall, the market environment in Hong Kong has shown early signs of improvement. Leasing activity has picked up in various districts, including Quarry Bay, Causeway Bay and Wan Chai. While the demand is primarily for smaller office spaces below 5,000 sq ft, this uptick indicates a more positive sentiment compared to previous months.

In 2025, the Hong Kong office market is expected to face a high vacancy rate due to the delivery of new developments. We believe the pace of market recovery will depend on various factors, including economic conditions and government policies.