The View | Rebound in Hong Kong’s Central office market could be turning point

Calling the recovery in Hong Kong’s property sector has been a devilishly difficult task. Since 2019, a succession of domestic and external shocks has delayed a revival in sales and leasing activity, preventing a broad, sustainable recovery from taking hold and fuelling uncertainty about the timing of a meaningful upturn.

To be sure, there have been increasing signs of resilience and strength, especially in the housing market. Average rents hit a record high in September and have risen more than 15 per cent since January 2023 amid the sustained influx of mainland Chinese professionals and students. In the sales market, total monthly transactions have surpassed 5,000 units for nine straight months and are expected to surpass 62,000 for the year, slightly more than in 2017, according to data from Cushman & Wakefield.

In the commercial property market, by contrast, the downturn has been more severe, dulling the impact of pockets of resilience in the sector. This is no more apparent than in the office market. Since their peak in January 2019, rents for grade A buildings have plunged 43 per cent because of the severe imbalance between demand and supply.

Since 2022, a further 10 million sq ft (929,000 square metres) of new grade A space was added to the market, contributing to the relatively subdued levels of net take-up. According to Knight Frank, rents will decline an additional 2.5 per cent next year, one of the worst performances in the Asia-Pacific along with the leading mainland Chinese office markets.

That is something of an overstatement, given the scale of the supply-demand imbalance in the office sector and the fact that rents in most submarkets continue to decline.