Hong Kong Island to see around 3.5m sq ft of new office supply by 2025

Rents are bound to suffer further downward pressure.

With the significant headwinds facing the global economy, Hong Kong suffered from poor market sentiment, affecting the overall leasing performance of Grade-A office buildings on Hong Kong Island and dragging down the rents.

According to Knight Frank, “flight-to-quality” remained an occupier priority and drove leasing demand. Occupiers continued looking for office quality upgrades at lower rents, especially in prime locations.

Here’s more from Knight Frank:

By 2025, there will be about 3.5 million sq ft of new office space supply on Hong Kong Island, mainly in Central and Quarry Bay districts. The record-high vacancy rate in Central, coupled with 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.

Considering the global and local economic situations, the market lacks positive factors to drive market recovery. We expect office demand to remain sluggish in 2023, and the overall rents on Hong Kong Island will fall by 3-5% for the whole year