Office space availability soars to record-breaking high

Some 14% of office space was left untenanted in Q1 2021, the highest rate since 2004.

Overall office space availability has reached 14% in Q1 2021, a record-breaking high since Q2 2004. This has been driven by larger occupiers like multinational corporations (MNCs) surrendering office space throughout the pandemic period, according to the latest report by Cushman & Wakefield.

Citywide rents went down 24.4% from the last peak in Q1, 2019, and Greater Central rentals dropped by 29.1% from the last peak values recorded in the same period.

“Although we see positive sentiment in Hong Kong building up gradually with vaccination in place, occupiers remained cautious and are still in the process of shopping for more cost-effective office options with favourable lease terms," Cushman & Wakefield executive Director & head of office services, Hong Kong Keith Hemshall said. "We expect this downsizing process will continue for a few more quarters, thus driving [the] availability rate further upward till [the] end of 2022."

Office space being surrendered amounted to 724,000 sq. ft. in Q1 2021, and mainly came from MNCs across sectors such as consumer products, manufacturing & sourcing (34%), banking & finance (23%), and professional services & real estate (21%).

Meanwhile, negative net absorption in Q1 was also up to a record high of 900,000 sq. ft. Cushman & Wakefield noted that rental decrease was the most severe in Greater Central submarket with -21.4% YoY.

"With record high negative net absorption, any new supply coming up in the market is likely to drive further rental decline,” Cushman & Wakefield managing director, Hong Kong John Siu said.