APPD Market Report Article

Hong Kong

August 26, 2022

Nelson Wong, Executive Director, Hong Kong


HKD 93.5


The flight-to-quality trend prevails

  • Overall Grade A office net absorption was 273,000 sq ft in 2Q22, attributable primarily to the completion of owner-occupied assets. The flight-to-quality trend prevailed as tenants actively sought office space upgrades. Notably, online grocery platform Ztore leased 26,000 sq ft (GFA) at Hang Seng Tower, Telford Plaza in Kowloon Bay, an upgrade from the previous office in an industrial building.
  • Anchor pre-commitment was also reported for upcoming completions. For instance, China CITIC Bank International has confirmed to pre-lease six floors (approximately 150,000 sq ft, LFA) at Two Taikoo Place in Quarry Bay, a relocation within Taikoo Place.

One building is completed during the quarter

  • The Treasury Building, a government bulding in Cheung Sha Wan, was completed in 2Q22, adding 285,000 sq ft to the Grade A office stock.
  • A considerable amount of new supply (approximately 3.9 million sq ft) is slated for completion in the remainder of 2022, mostly in decentralised areas, notably AIRSIDE in Tai Kak, Two Taikoo Place in Quarry Bay and 98 How Ming Street in Kwun Tong.

Rental and capital values drop marginally

  • Rents in the overall market dropped 0.2% q-o-q as submarkets’ performances diverged. Notably, rents in Central and Wanchai/Causeway Bay rose 0.1% and 0.2%, respectively, while Hong Kong East registered the biggest rental decline of 1.0% during the quarter.
  • Capital values in the overall market dropped 0.2% q-o-q in 2Q22. Investment yields remained at 2.8% for the overall market.

Outlook: Pre-commitment of new supply drives net absorption

  • The positive net absorption trend is anticipated to continue in 2H22, owing to pre-commitment of new supply and sustained occupier demand from those who continue to look for higher quality options and upgrade their workspace for talents. 
  • Central is expected to lead the rental rebound due to limited stock availability and growth of existing occupiers. The large amount of new supply will likely keep the rental recovery momentum at moderate levels in 2022 and 2023. Some submarkets are expected to be under more rental pressure as marketing campaigns of new builds intensify.

Note: Hong Kong Office refers to Hong Kong's overall Grade A office market.

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