Hong Kong Office Market Net Absorption Reached 183,000 Sq Ft in Q3
Office Absorption Driven by Pre-Committed Space in Hong Kong East
New “0+3” Quarantine Measure to Help Reignite Business Travel, Although No Immediate Boost to Tourism Activities is Anticipated
Office and retail leasing activities were both relatively quiet in Q3. Overall office market net absorption returned to positive territory on the back of pre-commitments at new projects within the Hong Kong East district. Nevertheless, a rise in the availability rate saw rents trend downward at -2.3% q-o-q in Q3. The local retail market also remained weakened, with total retail sales for January to August 2022 recorded at HK$226.7 billion, down 1.5% y-o-y.
Office Market Key Highlights
- Positive net absorption in Q3 was mainly driven by lease commitments at new completions in the Hong Kong East submarket
- The public sector, insurance firms and flex space operators have been more active in driving new leases
- Approximately 2M sf of space from new completions entered the market in the quarter, lifting the availability rate to 16% and further pressing rents downwards by 2.3% q o q
- Tenant-favorable market conditions will continue, with landlords becoming more willing to offer incentives and subsidies
- Interest rate hikes, high inflation, geopolitical concerns and economic uncertainties are likely to curb office demand in Q4
Retail Market Key Highlights
- High street store vacancy edged down in Q3, led by Hong Kong Island submarkets
- F&B rents picked up moderately, despite high street rents remaining under pressure in Causeway Bay and Tsimshatsui
- Athleisure and fashion brands to help support retail demand, with some expansion activities observed
- Latest “0+3” quarantine policy can help long term growth, but may shift local spending abroad in the near term
- Retail market could see a more meaningful recovery in 2023 if the quarantine rules are further relaxed
