Kowloon May Lure More Chinese Companies Amidst Falling Office Rents

HONG KONG – The average office rent in Hong Kong’s Kowloon declined last month, making office rents in parts of the district close to the rates in mainland Chinese cities in the Greater Bay Area, particularly Shenzhen and Guangzhou, reported the South China Morning Post (SCMP) on Tuesday morning (21 June, SGT).

In May 2022, average office rent in Kowloon dropped 9.3 percent to HK$26.90 (US$3.43) psf. Knight Frank’s Executive Director Patrick Mak revealed that office rents in the district now range between HK$25 psf and HK$30 psf, while that in the Greater Bay Area average from HK$23.52 psf to HK$29.38 psf.

Knight Frank and Colliers said the narrowing rental gap may help Kowloon attract more Chinese firms.

“The Kowloon grade-A office market demonstrated much stronger momentum since the easing of the fifth wave of the epidemic. New set-ups of Chinese mainland enterprises, relocations from Hong Kong Island, and office upgrades are the major sources of new demand in Kowloon that fuelled the momentum. We have also witnessed growing demand for medical real estate in Hong Kong,” noted Mak.

In particular, Colliers expects Kowloon West will make up 29 percent of the 14.6 million sq ft of new office stock in 2026. Currently, the district just accounts for 7 percent of Hong Kong’s overall office supply.

“Kowloon West and New Territories West account for 36 percent of the next five years’ new supply. This will make Kowloon West the fastest-growing submarket in Hong Kong,” said Colliers Research Head Rosanna Tang.

Moreover, Mak pointed out that while the present number of Chinese companies in Kowloon is about 20 percent less than the number on Hong Kong Island, the gap has closed substantially from between 30 percent and 35 percent five years ago.

“Kowloon West has its own advantages to attract Chinese mainland companies, with its proximity to the border and the airport. Particularly now the government is also pushing the linking to the Greater Bay Area via the airport area, linking up Macau and Zhuhai, surely demand will also start to pay attention to this area.”

But at present, Kowloon West is home to only six Grade-A office buildings, versus Central’s 19 and 15 in east Kowloon.

And CBRE’s Executive Director Marcos Chan believes that Chinese companies still prefer Central or East Kowloon, which is anticipated to become Hong Kong’s 2nd core business district in the long run.
“Central has been very mature and companies with more international demand will not relocate,” Chan added.