Landlords in the city are reportedly finding themselves with ever greater demand for their premises and the associated rental rates are being forced upwards as a result.
The picture varies in each part of the city but, in general terms, supply has not been able to keep up with demand across Hong Kong in recent months and particularly since the beginning of this year.
Economic growth is now being maintained, which has encouraged many businesses to expand their operations and start looking for more office space to rent in Hong Kong, Knight Frank reports.
The cost of renting office space in the city is now forecast to rise by as much as a quarter over the course of this year. “By the end of 2011, it is likely that grade A office rents in all major business districts in Hong Kong would surpass their previous 2008 peaks,” the new report states.
See examples of office space for rent in Hong Kong here
Rent-free periods are now being less frequently agreed to in the city as landlords realise the strength of their position and the level of demand that currently exists for high-quality office space in central Hong Kong.
The Knight Frank review of Hong Kong’s office market follows a report from Cushman & Wakefield suggesting that office space in the city is now the most expensive to be found anywhere in the world, surpassing even that of London’s West End.
A number of other Asian markets also look particularly strong at present, with both Shanghai and Beijing having seen notable rises in the cost of renting their office spaces.
Editor’s notes: In 2022, with prime office space at a gross effective rent of USD 259 per square foot per year, the Central district in Hong Kong was the most expensive place in the world to rent office space.
Followed by Midtown in Manhattan and then the West End in London.
This article was originally published in 2011 in the aftermath of the Great Recession and is being updated in the aftermath of the pandemic, during a cost-of-living crisis, a supply chain crisis, rising interest rates, an energy crisis and, on top of this, Hong Kong has had its own specific issues to deal with as it is particularly close to the Chinese mainland which suffered considerably during the pandemic, and it has experienced civil unrest.
Despite this, in April 2023, Hong Kong’s vacancy rate declined for the first time in 10 months to 12%
It was also reported that there was net absorption of 203,900 square feet of office space in the previous month.
The dropping of Covid-19 restrictions and the re-opening of the border with mainland China in February appeared to inject energy into Hong Kong’s market.
As companies across the world make a ‘flight to quality’ and seek premium office space with great amenities and substantial ESG credentials, the demand for the best-in-class office space in Hong Kong will likely put upward pressure on rents and there is a good chance that Hong Kong will remain the most expensive place in the world to rent office space in 2023, too.