Office rents to decline 3%-5% in 2023: report

The demand will remain sluggish due to global and local economic situations.

Office demand in Hong Kong will still be “sluggish” in 2023, with overall rents seen to fall by 3% to 5% as the “market lacks positive factors to drive market recovery” due to the global and local economic situations.

In a report, Wendy Lau, executive director and head of Hong Kong Office Strategy & Solutions at Knight Frank, said the decline in the global economy led to the poor market sentiment which affected the overall rents and leasing performance of Grade-A office buildings.

“Flight-to-quality” is still also an occupier priority and supported leasing demands. Occupiers particularly look for quality upgrades which cost lower rents, especially in prime locations.

READ MORE: Grade-A Office rents down 1.9% MoM in October

By 2025, Lau said new office space supply in the market will reach around 3.5 million square feet, mainly in Central and Quarry Bay districts. However, the record-high vacancy rate in Central, along with the abundant supply in the next couple of years, “will put further downward pressure on rents.”

“In the short term, some relatively aggressive landlords will deploy substantial price reductions to attract tenants, and a round of price reduction war can possibly happen. Compared with Central, the rent at Quarry Bay is already at a very low level so a less extent of downward rental adjustment is expected,” Lau said.