Hong Kong sees three Grade A office building completions in Q3 

All buildings are located in Kowloon East.

There were three Grade A office buildings completed in Kowloon East, Hong Kong during the third quarter of 2022: Boton Technology Innovation Centre (previously known as 368 Kwun Tong Road), AIRSIDE, and Inland Revenue Tower in Kai Tak, which amounted to a total of 1,615,000 sq ft (NFA).

According to JLL, a considerable quantity of new supply (approximately 2.3 million sq ft) is slated for completion in the remainder of the year, mostly in decentralised areas. Notable examples include Two Taikoo Place in Quarry Bay and 98 How Ming Street in Kwun Tong.

Here’s more from JLL:

Overall Grade A office net absorption recorded 344,000 sq ft in 3Q22, primarily due to completions in non-core submarkets. Leasing activities were limited. The real estate decision process was protracted due to a sluggish macro-environment, the summer season and increased overseas travel.

Notwithstanding that, expansion cases were recorded at the International Commerce Centre in West Kowloon. These included CICC, Far East Horizon, and IWG, which leased 47,500 sq ft, 10,100 sq ft, and 33,000 sq ft (GFA) respectively.

Rents and capital values drop marginally

A drop in rents was recorded in most submarkets, except in Tsimshatsui where rents rose a marginal 0.3%. Rents in Central dropped 0.9% in 3Q22, a reversal of the upward tilting trend since 3Q21.

Capital values in the overall market dropped 3.5% q-o-q in 3Q22. Investment yields expanded marginally to 2.9% for the overall market.

Outlook: Net absorption to remain positive despite rental pressure

Office rents are expected to go largely sideways in the near term. The positive impact from loosened travel restrictions is likely to drive a pick-up in office leasing activities, which in turn drives rental recovery, albeit in a modest manner.

The large amount of new supply will likely keep rental recovery momentum moderate in 2022 and 2023. Some submarkets are expected to be under more rental pressure as marketing campaigns of new builds intensify.