Grade A office rents to decrease by 2% due to new office supply

There could be 3.9 million square feet of new Grade A supply. 

Colliers said it expects the Grade A office rental market in Hong Kong to decline 2% in 2022 because it will be pressured by the potential new office supply in the second half of the year.

In its report, the property analyst said there could be 3.9 million square feet (sq ft) of new Grade A supply, which can raise the year-end vacancy and will pose pressure on rental outlook.

Fiona Ngan, head of office services at Colliers, said the rental gap between non-central districts and central business district will also narrow whilst rents in Kowloon will pick up.

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“Given the higher availability of new office space, which means occupiers should have more bargaining power as well as increased options, we expect flight-to-quality will remain the key theme for the office market for the rest of the year,” said Ngan.

New office letting demand also posted a net absorption of -176,300 sq ft in the second quarter of 2022. 

“This marked the slowest quarter since 2021 and pushed the overall vacancy rate up 0.4 percentage points to 11.2%,” said Colliers.