Big financial firms' unstoppable downsizing to hurt office leasing demand

Medium-sized companies take up spaces left by multinationals.

It has been noted that Grade-A office leasing on Hong Kong Island remained subdued in July.

According to a research note from Knight Frank, many large financial institutions continued downsizing, which had a negative effect on leasing demand. Some expanding medium-sized firms capitalised by taking up space released by multinational corporations. This trend appears likely to continue.

Kowloon tells a different story, though, according to the report. Large supply drove landlords to offer more incentives to tenants. Some office buildings, especially those converted from industrial use, started leasing space to semi-retail tenants such as fitness centres despite the tenants’ relatively lower rental affordability. Meanwhile the market has also seen several en-bloc office sales.

David Ji, Director, Head of Research & Consultancy, Greater China, expects Central office rents to increase further because of the tight availability. Meanwhile he expects that office rents in decentralised areas like Kowloon will be under pressure due to increasing upcoming supply.