HK Office Market Likely Near Bottom

HONG KONG – The Chinese territory’s office property market continues to show bottoming-out signals along with stabilizing office rents, according to Knight Frank’s latest Hong Kong Monthly report.

But in October, tenants generally took a wait-and-see approach towards their long-term property goals. Rather than relocation, occupants preferred to opt for lease renewals, stated the real estate consultancy.

“Examples include lease renewals of Japanese logistics company Nippon Express, with 17,714
sq ft in Chinachem Golden Plaza, and multinational music corporation Universal Music, with 17,606 sq ft in Millennium City 6,” revealed Knight Frank.

The property consultancy also noted that Hong Kong’s Central saw a return in demand from office
occupants as the recentralization trend became more apparent in October. This resulted in a drop in the area’s vacancy rate and a continuous uptick in leasing activity. Consequently, overall office rents in Central increased by 4.2 percent quarter-on-quarter in Q3 to HK$113.6 psf.

“But leasing demand in the non-CBD area was relatively weak, and landlords were more flexible in lease negotiations,” noted Knight Frank.

Amidst this market, coworking space providers jumped on the chance to expand at reduced rents. For instance, Swiss-based coworking space operator IWG leased 2 office floors in Causeway Bay’s Tower 535. The new flexible workspace can accommodate over 300 workstations to meet the demand amidst the trend for hybrid work.

Meanwhile, Jones Lang LaSalle (JLL) disclosed that the top leasing transaction in Central during October was when Apollo Global Management signed a deal to occupy a 13,900 sq ft upper floor workspace within Hongkong Land’s One Exchange Square for about HK$120 psf per month.

The US private equity fund, founded by Leon Black, is shifting within Central from its present office in the Hong Kong Club Building along Chater Road.