Hong Kong residential, retail properties recover while office sector struggles with glut

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Reports of brisk weekend home sales show the housing market will outpace offices in recovery going into 2025, consultancies say

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Hong Kong’s office skyline in Central in February 2024. Photo: Sun Yeung

Cheryl Arcibal

Published: 8:30am, 29 Oct 2024

Hong Kong’s office market is likely to trail other segments in terms of recovery as interest-rate cuts and easier mortgage financing rules drive bigger interest and deals in the residential and retail properties, analysts said.

Office vacancy rates continued to worsen last month in more business districts in the city including Central, Wan Chai, Causeway Bay and Tsim Sha Tsui, JLL said in its latest report. Rents fell by 1.1 per cent from August, the property consultancy said.

“It would take some time to climb out of the trough, especially now enterprises are still finding it challenging to expand [their office space],” said Martin Wong, senior director and head of research and consultancy for Greater China at Knight Frank.

The market is facing an oversupply situation as vacancy rates hold near all-time highs, according to consultancy CBRE. Hong Kong developers and landlords are set to add about 3 million square feet of new office space next year, the firm forecasts, compounding a glut.

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New buildings set to come on the market next year include the 2.1 million sq ft International Gateway Centre in Tsim Sha Tsui by Sun Hung Kai Properties, the 410,400 sq ft One Causeway Bay project by Mandarin Oriental and Hongkong Land, and the 310,700 sq ft project of SEA Holdings in Kowloon East.

This is likely to make the vacancy rates worse by the end of 2025, while rents are will be depressed by another 5 per cent, according to CBRE.