Kowloon office market shows signs of soft landing amidst polarised conditions

Several factors will determine the trajectory of this ‘soft landing’.

Kowloon’s office market remains under pressure, but early signs of a “soft landing” are emerging, particularly in prime locations, according to Knight Frank.

Steve Ng, Executive Director and Head of Kowloon Office Strategy & Solutions at Knight Frank, said, “Vacancy rates are easing in Kowloon Central and Kowloon West, supported by targeted demand from banking, finance, and insurance tenants pursuing expansion opportunities in the Greater Bay Area.”

Ng noted that these tenants are prioritising Grade-A buildings with premium harbour views, which, although limited in supply, provide crucial support and help cushion the downward pressure on rents. “This targeted demand explains the appearance of a soft landing in these areas,” he said.

However, Ng highlighted ongoing challenges in Kowloon East. “Kowloon East continues to face a persistent supply surplus, contributing to overall market polarisation. Harbour-view Grade-A offices are drawing steady interest from key sectors, while Kowloon East endures ongoing downward pressure,” he explained. The absence of large-scale occupiers continues to weigh on overall market performance.

Looking forward, Ng said the trajectory of this soft landing depends heavily on macroeconomic factors, including government policy, geopolitical tensions, and investment-driven supply. He added that a sharp reduction in new major supply from 2026 onward will give the market time to absorb the substantial leftover stock from 2024 and 2025.

“This dynamic should allow the market to gradually shift away from declining trends, with rents likely to bottom out in the second half of 2026, provided macro conditions remain favourable,” Ng said. Knight Frank projects that overall Kowloon office rents will decline by 4% to 6% in 2026, indicating that while challenges persist, the market is steadily progressing toward recovery.