In a report from Hong Kong, Liu Baiwen, Executive Director and Head of Commercial Property Services for Hong Kong at Leung Fung, expressed his expectation that demand for office leasing in the second half of the year will remain subdued due to a lack of positive driving factors and the current economic conditions. With office rents in the core areas continuing to decline, it is projected that rents for Grade A offices on Hong Kong Island will decrease by 3% to 5% this year.
According to Liu Baiwen, the Hong Kong office market continues to face challenges, with rent decreases and rising vacancy rates being major issues. Limited new demand has contributed to an overall 2% decrease in office rents in Hong Kong Island as of May this year, with a vacancy rate reaching 12.3%. Specifically, Central has seen the largest drop in office rents, declining by 3.4% since the beginning of the year.
He noted that with mainland Chinese enterprises returning to Hong Kong, there has been an increase in demand for small to medium-sized high-quality offices below 5,000 square feet. Despite a sluggish performance in the financial sector, some overseas financial institutions are still expanding their businesses. Additionally, the trend of decentralization and upgrading of offices continues, with tenants taking advantage of lower rents to move to better locations and higher-quality office spaces.
Wu Zhifeng, Senior Director and Head of Commercial Property Services for Kowloon at Leung Fung, stated that there is an imbalance between supply and demand in the Kowloon office market, intensifying market challenges. Although the completion volume of office buildings in Kowloon has significantly decreased this year, the surplus supply from new office buildings accumulated last year has led to an oversupply this year. However, the Kowloon office market is still lacking strong demand. With increased competition among landlords, it is expected that overall office rents in Kowloon will see a moderate increase of 0% to 2% this year.