Hong Kong Q1 Grade A office absorption reaches record highs since 2018

Net absorption totalled 612,000 sq ft in Q1.

According to CBRE, Hong Kong Grade A office leasing volume increased by 35% quarter-on-quarter 1.3 million sq. ft. in Q1 2024, partly driven by relocation and consolidation demand in recently completed buildings. Over 75% of deals registered this quarter were for space under 5,000 sq. ft.

Here’s more from CBRE:

Net absorption totalled 612,000 sq. ft., with 400,000 sq. ft. of this figure involving pre-leased space in three newly completed buildings. This quarter’s net absorption was the highest since Q3 2018, when the fully-preleased One Taikoo Place was completed.

Most submarkets except Greater Central reported positive net absorption. Occupancy in Hong Kong East increased by 71,600 sq. ft., the first growth since Q4 2022, driven by tenants relocating within the same district and taking more space. A few sizable deals in AIRSIDE ensured Kowloon East registered 233,300 sq. ft. of net absorption.

New supply totalling 925,200 sq. ft. and slow pre-leasing progress in new projects ensured overall vacancy reached another all-time high of 14.7 million sq. ft. or 16.7%.

The vacancy overhang meant rents fell 1.2% quarter-on-quarter, marking the 20^th consecutive quarterly decline. 

Ada Fung, Executive Director, Head of Advisory & Transaction Services, CBRE Hong Kong: “For Q1 2024, new leasing activity has improved quarter-on-quarter with close to one-third of activity contributed by the banking and finance sector. Larger transactions involved various quasi-government authorities. New supply in the market has pushed both net absorption and vacancy further to higher levels, and also offers more new options for occupiers. Decentralised locations such as Kai Tak continued to attract occupiers’ attention. Moving forward, with companies’ cost control policies still in effect and further new office supply from the pipeline, vacancy is expected to trend higher and ensure pressure on rents for the rest of the year. We expect the office leasing market will continue to favour occupiers in the short run.”