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Mainland demand not enough to lift Hong Kong’s office rental market: report

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Vacancy estimates vary considerably from agency to agency. Colliers, for example, said the vacancy rate in Hong Kong’s prime office space hit a record of 15.1 per cent towards the end of August of last year.

New buildings have made more office space available in the city. For example, Six Pacific Place, with 218,000 sq ft of gross floor area in Wan Chai, and the 27-storey Viva Place covering about 300,000 sq ft in Wong Chuk Hang came on the market between January and March, according to JLL.
Among mainland Chinese companies that leased new office space in the span were Beijing-headquartered medical equipment supplier Golden MediTech, which moved from the Bank of China Tower to a 6,000 sq ft space in The Henderson, according to Knight Frank. Carmaker Brilliance China Automotive Holdings also moved into The Henderson, leasing 6,300 sq ft of floor space.

“Most mainland Chinese companies are looking for spaces of about 6,000 sq ft so they will not be enough to significantly bring down vacancy rates,” said Martin Wong, director and head of research and consultancy for Greater China at Knight Frank.

Grade A office rents fell 2.7 per cent quarter on quarter, according to JLL.

“Higher quality space will remain the focus of occupiers,” said Cathie Chung, senior director of research at JLL in Hong Kong. “The office leasing demand was mainly driven by consolidation and upgrading activities in the first quarter of 2024.”

Although there have been a number of large leasing transactions in the past few months, Chung said office rents are likely to decline between 5 per cent and 10 per cent this year.

Prudential Insurance leased an entire floor measuring 53,600 sq ft in Airside, the mixed-use development by Nan Fung group in Kai Tak that includes a grade A office tower and a 700,000 sq ft retail complex, according to market sources. Singaporean bank OCBC leased 54,800 sq ft in the same building, according to Cushman & Wakefield.

Other leasing activities in the quarter included the Hong Kong Monetary Authority signing up for three full floors with a gross area of 79,200 sq ft in the city’s tallest tower, the International Commerce Centre in Tsim Sha Tsui, and the Hong Kong University of Science and Technology leasing two floors for a total area of 29,700 sq ft in The Millennity Tower 1 in East Kowloon, Cushman said.

Asia Infrastructure Solutions, an engineering firm, leased 40,400 sq ft on two floors in Two Harbour Square in Kowloon East, Cushman added.

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