Asia Pacific Office Outlook 2024

HONG KONG

K E Y M E S S AG E S

SUPPLY

DEMAND

RENTS

KEY OUTLOOK

 Hong Kong’s office market continued to face headwinds, with net absorption expected to record -143K sf in 2023, but to rebound up to 600K sf in 2024 due to the pre commitment from supply.  As a result of new supply, availability is expected to increase to 19.1% by the end of 2023 and to further increase to 19.6% in 2024.  The overall availability will stay in the double-digit territory in the foreseeable future, as demand will unlikely catch up with supply as the market remains affected by geopolitical and economic uncertainties.

 Hong Kong office space leasing recovery remained slow due to global economic uncertainties and persistent inflationary pressures.  Occupiers adopted a cautious approach towards decision-making. Rents are forecast to decline by 7% in 2023, and then drop slightly further by 8% in 2024, before declining at a slower pace of 4% in 2025.  This movement will take rents to HKD 48 per sf/mth at the end of 2023, and to drop further to HKD 45 per sf/mth by the end of 2024, before bottoming out in 2025 at HKD 43 per sf/mth.

 After 1.8 msf* of new supply in 2023, five new projects are expected to enter the market in 2024, totaling 1.2 msf. Of the new projects, two will be in Kowloon East, with on each in Greater Central, Wanchai / Causeway Bay and Kowloon West, respectively.  Beyond 2024, the supply is expected to peak at 4.0 msf in 2025 and then drop back to 750K msf in 2026.

 Looking ahead, given the uncertain global economic outlook, occupiers are expected to maintain a conservative approach towards managing their real estate costs, in turn further weighing on office rents amid high vacancy levels.  We expect that mainland enterprises will continue to play a pivotal role in supporting demand in core submarkets and for quality properties in prestigious locations with good accessibility.