Grade A office rent drops 1.0%, vacancy up 16.6% in Q2

Grade A office vacancy has reached a record high of 13.8 million sq ft.

In Q2 2024, overall Grade A office rent declined 1.0% QoQ to $51.0 per sq ft (psf) as rental rates across all submarkets fell, Colliers reported.

The Central/Admiralty submarket fell 1.2% QoQ to $89.6 psf, whilst the Island East submarket saw the sharpest drop of 2.4% QoQ.

In the same period, the vacancy rate soared to 16.6%, with the Central/Admiralty submarket recording an increase of 2 percentage points (pp) following the completion of two major projects, The Henderson and Cheung Kong Center II.

Overall Grade A office vacancy reached 13.8 million sq ft net floor area (NFA), surpassing the peak of 0.4 million sq ft in Q1 2024.

Looking ahead, Colliers expects vacancy to fluctuate around its current level in H2 2024, with the completion of Cheung Kong Center II being the last major new office supply for the year.

Meanwhile, Colliers revealed that only 19% of Hong Kong firms plan to expand their office space, whilst 27% intend to downsize in 2024 due to rental levels and relocation costs.

In addition, Colliers expects that overall Grade A office rent will decline by about 7% this year amidst limited market demand.