Grade A office leasing volume grew 32% in Q3

It was at par with Q1 2023.

The leasing activity volume increase was attributed to relocation and consolidation demand, CBRE reported.

The net absorption turned positive in Q3 2023, recording 166,700 sq. ft. Specifically, Greater Central and Hong Kong East registered noticeable declines in occupancy, but Kowloon East saw an increase in occupancy due partly to some forced relocation activities in Kowloon Bay.

There is an absence of new supply and overall positive net absorption ensured citywide vacancy edged down 0.2-ppt to 15.8%. Total vacant space remained high at 13.6 million sq. ft.

Limited demand and persistently high vacancy saw rents decline a further 1.4% q-o-q, which is higher than the 0.5% drop in Q2 2023 and marking the 18th consecutive quarterly decline. 

Core Central rents experienced the sharpest fall, dropping by 1.4% q-o-q after staying largely flat in Q2 2023. Rents in Tsim Sha Tsui and Kowloon East logged marginal increases of 0.2% q-o-q and 0.3% q-o-q, respectively, as new leases were signed in selected buildings and landlords of other properties held off from implementing further rental reductions.

Ada Fung, Executive Director, Head of Advisory & Transaction Services – Office Services, CBRE Hong Kong, said office leasing demand has picked up slightly from Q2 2023, with a noticeable level of activity found in Kowloon East where some buildings captured the demand from occupiers relocating out of KITEC for the site’s up and coming redevelopment plan. 

“Yet the overall vacancy stabilized at approx. 16% despite the positive net absorption in the quarter,” she added.

Fung found that cost saving was still the key objective, with some office occupiers looking for fully-fitted office space to minimize CapEx during their moves.