Hong Kong Office Rent Forecasted To Drop By Up To 5% In 2022

HONG KONG – Property experts said that office rents in the Chinese territory could fall further this year due to a growing oversupply of new prime office space, reported the South China Morning Post (SCMP) on Wednesday morning (17 August, SGT).

According to Cushman & Wakefield (C&W), office supply in Hong Kong is expected to reach a 24-year high as 2.8 million sq ft of new prime office space is expected to enter the market in 2022.

In addition, it’s estimated that the supply of new office space will increase to between 4.3 million sq ft and 6 million sq ft over the next two years and this could further drag down office rents.

C&W’s Research Head in Hong Kong Rosanna Tang said that overall office rents in Hong Kong have already dipped by 1.7 percent to HK$55.10 psf so far this year and it could fall by as much as 5 percent this year. However, this could translate to a plunge of up to 30 percent from its peak in 2019.

Moreover, the city’s office availability rate will increase to as much as 17 percent by the end of 2022 from 13.8 percent currently, she noted. Notably, office availability rate includes office space that is confirmed to be already vacant or will become vacant in the next 12 months.

“The higher availability rate could become a ‘new normal’ for the office landscape in Hong Kong, intensifying competition among buildings while net take-up remains slow,” she added.

Meanwhile, CBRE Hong Kong’s Head of advisory and transaction services for office services Ada Fung shared that the prime office vacancy level here is expected to rise in 2023 from the current 12.3 percent. She also thinks that office rents would remain flat or drop by up to 5 percent in 2022.

Nonetheless, C&W’s Tang believes that office rents across key submarkets would stabilise next year after correcting by roughly 20 percent to 30 percent since the last rental peak in April 2019.

“A substantial rental recovery could be challenging in the near term, given the economic and pandemic uncertainties that are disrupting business sentiment and hence new demand in the city,” Tang added.