Grade A offices rents decrease by 6.5% in August

Office rents declined to HK$62.6 per sq ft. 

Grade A office rents in Hong Kong declined to HK$62.6 per sq ft in August, decreasing by 6.5% year-on-year (YoY) and 3% year-to-date (YTD), according to Knight Frank’s research. 

Amongst the major submarkets, Central, Admiralty, and North Point recorded a larger rental decline of -5.8%, -6.0%, and -9.7% YTD, respectively. 

Meanwhile, the overall vacancy rate for Grade A offices remained at 13.4%.

Several local law firms, particularly those specialising in conveyancing, initial public offerings (IPOs), and local securities firms, have scaled back their operations due to the challenging economic environment. 

However, new hedge funds in the market are driving new demand for office space below 5,000 sq ft. 

Recently, a local hedge fund leased the whole 9th floor, which was equivalent to 5,700 sq ft of LHT Tower. The growth of hedge funds is expected to drive some leasing activity in the coming months.

The report maintains its rental forecast of a 3% to 5% drop in 2024.

In Kowloon, the volume of new leasing transactions saw a decrease of 13% month-on-month (MoM) in August due to the summer holiday period.

With limited new demand, the average monthly rent dropped to HK$22.8 per sq ft.; however, leasing activity is expected to gradually increase in September and October after the summer holiday. 

Leasing activity from semi-retail tenants picked up during the month, with HKU Space leasing a 23,593 sq ft office in Kingston International Centre in Kowloon Bay.

The report noted that office rents in the Kowloon market are expected to experience a mild drop in the coming months, as tenants adopt a more conservative approach to the market outlook. 

Rents in Kowloon East are expected to drop by 3% to 5% due to the exit of ICBC from Kwun Tong.