Financial sector to drive leasing demand for Hong Kong office space

Around 2.8 sqm of space is scheduled for completion this year.

After a strong year in 2015, the Hong Kong Grade A office market was slower in 2016, with net absorption standing at 368,000 sq. ft. by year-end – equivalent to just 15% of the full-year total achieved in 2015.

According to CBRE Research, the slowdown in leasing momentum was mainly due to the weaker demand from MNC occupiers as well as limited space availability in the core office submarkets.

Leasing demand in 2017 will continue to be driven by the financial sector, which is set to benefit from the recently expanded bilateral finance trade platform between Hong Kong and China. Chinese firms, which have been instrumental in contributing office demand in recent years, will likely expand at a slower pace due to the tighter control on capital outflows.

“New office supply will rebound substantially this year, with 2.8 million sq. ft. (NFA) of new space scheduled for completion in 2017,” said Alan Lok, executive director, advisory & transaction services - office, CBRE Hong Kong. “This is the highest annual supply since 2008. But the majority of new supply is situated in decentralized locations.”

Space availability in Central is expected to remain tight with rents expected to edge up within a 5%-range. Office rents will remain broadly flat in other Hong Kong Island submarkets while Kowloon will see rents drop by 5%-10%, due mainly to higher vacancy levels.