Grade A Office leasing volume drops 26% QoQ in Q2 despite higher sales

Most transactions were small in size.

The total gross leasing volume of Grade A office in the second quarter of 2023 declined to 786,000 square feet compared to the previous quarter, said CBRE.

There were also several major relocations, making absorption fall back to negative territory. This brought half-yearly net absorption to -276,700 sq ft.

The negative net absorption pushed up total vacant space to another new record high of 13.5 million sq. ft. Whilst overall vacancy grew by 0.4-ppt during the first half of 2023 to an all-time high of 15.7%.

Weaker demand caused overall rents to fall 0.5% q-o-q in Q2 2023, bringing the half-yearly drop to -2.2%. Rents in the core of Central, however, were steady for the first time since Q2 2022, up 0.1% q-o-q. 

Hong Kong East holds hard knock amongst other sub-markets in five of the past six quarters, reporting a decline of rents to 0.4% q-o-q, after registering a 3.8% q-o-q drop in Q1 2023.

Ada Fung, Executive Director, Head of Advisory & Transaction Services – Office Services, CBRE Hong Kong, said “Some office occupiers are assessing long-term leasing strategies and are looking for ‘flight-to-quality’ moves. Leasing volume is likely to climb up in the remainder of the year.”