Hong Kong’s office net absorption negative for 8th consecutive quarter
This marks the country’s longest local market down cycle in history.
Occupancy in Grade A offices in Hong Kong further dwindled by 119,320 sq. ft. in the third quarter (Q3) of 2021, marking the eighth consecutive quarter of negative net absorption and longest local market down cycle in history, a report from CBRE Group showed.
Growth in occupancy for Q3 was only recorded in Kowloon East with a slight gain of 28,000 sq. ft.
The total volume of vacant space in Grade A offices also rose to a record number of 9m sq. ft after a vacancy in Q3 hit 11%, which is an increase of 0.2 percentage points (ppt). Hong Kong East’s vacancy had the sharpest jump at 8.5% which is a 16-year high.
Despite the leasing volume reaching 1.3 million sq. ft. for Q3, overall rents still fell 0.9% quarter-on-quarter following a 5.3% decline in the first half of 2021.
The CBRE Group however sees a dial-up in office leasing demand from Mainland Chinese companies once quarantine measures, particularly for inbound traveling, are loosened.
The easing for restrictions will also likely support Hong Kong’s “leasing demands and help stabilise rental and capital value growth” in the city for the next 6-12 months, according to the firm.
In the retail sector, vacancy rates will also remain at a high level “for longer” despite an uptick in leasing transactions in the market for Q3.
CBRE Hong Kong’s Senior Director for Advisory & Transaction Services – Retail Lawrence Wan said this is because “it takes time for the expectation gap between landlords and retailers to further narrow.”
Whilst high street shop rents were largely stable for Q3, street shop vacancy rose in Hong Kong's core districts, particularly in Mong Kok where a jump of 2.9 ppt to 18.9% was recorded.
Overall, the retail sector is recovering at a slow pace, Wan said.
Leasing momentum in the industrial sector likewise decelerated in Q3, partly due to “lower space availability.”
A 1.0% q-o-q growth, however, was recorded in warehouse rentals, decreasing vacancy by 0.2 ppt to 3%.
Despite the divergent trends seen across Hong Kong's real estate market sectors, CBRE said it is seeing a more upbeat outlook on the city’s economy.