Hong Kong Office Vacancy Hits Nearly 12%

HONG KONG – Data from CBRE showed that the overall vacancy rate of the Chinese territory’s office market edged up to 11.9 percent at the end of Q2 2022 from 11.6 percent from Q4 2021, reported Mingtiandi on Tuesday evening (5 July, SGT).

The amount of vacant Grade A office space reached a record-high of 9.8 million sq ft, which is equivalent to about five International Finance Centers, noted the property consultancy.

“As the trend of downsizing and cost-saving continued, the office vacancy rates in all submarkets increased to double digits in Q2 except for Central,” said Ada Fung, Executive Director and Head of advisory and transaction services for office at CBRE Hong Kong.

In particular, Greater Central registered the lowest vacancy level of 8.2 percent, up from 7.6 percent at the end of 2021. Kowloon East continued to show the highest rate at 14.6 percent, up from the 14.5 percent seen six months earlier.

Moreover, new Grade A office leases in Hong Kong dropped 6.7 percent year-on-year to 2 million sq ft in H1 2022 after leasing activity slowed by 23 percent to 855,700 sq ft in Q2 compared to the preceding quarter.

In Q2, pre-commitments in upcoming office towers made up 30 percent of office leasing volume, as the city’s stringent COVID-19 restriction hindered inspections of commercial properties in April.

Amidst a wave of office space downsizing, net absorption returned to negative territory (-279,000 sq ft) during the period under review, but it remained positive at 185,400 sq ft so far this year.

Meanwhile, overall office rents in Hong Kong dipped 0.3 percent during the second quarter following a 0.6 percent slide in Q1 2022. This has led to a 1.0 percent annual fall in office rent during the first six months of the year.

Rents in Kowloon East and Greater Central remained stable and outperformed those in other major office submarkets. However, Hong Kong East recorded the highest quarterly rental drop of 1.5 percent, added CBRE.