Hong Kong Office Market Sees Positive Net Absorption In 2022

HONG KONG – As of mid-November and in terms of net floor area (NFA), data from Cushman & Wakefield (C&W) showed that the city’s office sector recorded a net office absorption of 176,200 sq ft, the first positive figure since 2019, according to a report published on Media OutReach on Thursday evening (15 December, SGT).

Hong Kong’s net office absorption so far this year was primarily driven by pre-commitments at newly completed office developments. The latest figure also greatly exceeded the -580,000 sq ft and -2.3 million sq ft seen in 2021 and 2020, respectively.

“New leasing transactions continued to be dominated by the banking and finance sector, accounting for a 54 percent share of the market, while some large-sized deals (exceeding 10,000 sq ft of NFA) were from mainland China companies,” stated the property consultancy in its Hong Kong Property Market 2022 Review and 2023 Outlook.

However, Hong Kong’s Grade A office market witnessed a negative net office absorption of 75,400 sq ft during the 4th quarter. This comes as overall business sentiment remained cautious, with some office occupants downsizing to reduce costs amidst a lacklustre global economic environment.

In addition, the large amount of upcoming office stock further pushed up the overall office availability rate during the 4th quarter to 16.8 percent, a new high since the 1st quarter of 2004. The greater availability of office premises exerted downward pressure on office rents, with the city’s average rent sliding by 7 percent year-to-date as of November 2022.

“With more new office completions entering the market, coupled with the current attractive rental levels, we believe that occupiers will continue to seize opportunities for upgrading and flight-to-quality moves,” said C&W’s Head of Project and Occupier Services in Hong Kong, John Siu.

“Particularly, occupiers are increasingly demanding in their environmental, social, and governance (ESG) requirements when considering office options.”

Looking ahead, Siu anticipates that Hong Kong’s borders will gradually reopen by 2023, and this is expected to increase office rental demand both from local and global companies.

However, about 1.89 million sq ft of new Grade A office space by NFA will be completed next year, including 2 new office developments in Central. Consequently, the overall office availability is projected to hit 18 to 19 percent by the end of 2023, while office rent could drop by 2 to 4 percent on an annual basis.