Hong Kong Grade A Office

Hong Kong Grade A Office Rents Down 5.3% In 2023

HONG KONG – Jones Lang LaSalle (JLL) has forecasted that Grade A office rents in the Chinese territory could decline by 5 to 10 percent for the whole of 2024 after it fell by 5.3 percent year-on-year in 2023, according to a report from Mingtiandi earlier this week.

In particular, Grade A office rents in Central fell by 6.4 percent on an annual basis this year, while that in Hong Kong East tumbled by 7.9 percent. Conversely, Grade A office rents in Tsim Sha Tsui were unchanged, making it the only office submarket in the city that avoided a drop in 2023.

JLL’s Head of office leasing advisory for Hong Kong Sam Gourlay said the city’s Grade A offices are expected to remain an occupants’ market in 2024, with large tenants taking advantage of opportunities to upgrade from their current workplace or consolidate teams as huge blocks of office space become available in newly completed developments.

“We expect to see more large space transactions next year. With the completion of new and high-quality projects in 2023 and 2024, tenants in need of multiple floors will have a rare opportunity to choose from a diverse range of premium options.”

Meanwhile, Knight Frank expects a milder 3 percent dip in Grade A office rents in Hong Kong next year, whereas Cushman & Wakefield (C&W) is looking at a sharper drop of 7 to 9 percent, after office rental momentum recovered more slowly than anticipated after the reopening of Hong Kong’s border with mainland China in Q1 2023.

“If accounting for the remaining new supply potentially to be completed before 2023 year-end, the availability rate could surpass 19 percent by then, exceeding the record high of 18.1 percent in Q1 2004,” said C&W’s Head of project and occupier services for Hong Kong, John Siu.

As for the city’s Grade A office vacancy, it climbed to 12.9 percent by Q4 2023, with 9.9 percent of the workspaces in Central lying vacant. Nonetheless, JLL noted that the overall amount of relinquished office space across Hong Kong’s five largest submarkets dropped 27.2 percent year-on-year to 552,000 sq ft of net floor area, showing a slowdown in the corporate downsizing trend.

However, Knight Frank is forecasting that the Grade A office vacancy in Central would rise to an “unprecedented high level” next year because of the completion of 1.2 million sq ft of new office space.

“Given the global and local economic conditions, as well as the absence of positive news from the Chinese mainland, office leasing demand is expected to remain subdued in 2024 in the absence of stimulus,” added Knight Frank’s Head of Hong Kong office strategy, Wendy Lau.

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