The vacancy rates of Grade A offices in Central increased to 12.1%, at the end of June, mainly driven by new office supply, according to JLL's latest Hong Kong Property Market Monitor released today.

During the same period, the overall vacancy rate of Grade A offices increased to 13.6%. In contrast, the vacancy rates in Tsimshatsui and Kowloon East decreased by 0.4 and 0.2 percentage points, respectively, due to diminishing available office space for lease. Notably, the overall market recorded a negative net absorption of 53,700 sq ft last month.

Alex Barnes, Managing Director and Head of Office Leasing Advisory at JLL in Hong Kong, said: "The influx of new office supply has contributed to an ongoing increase in vacancy rates, particularly in commercial districts with more new office space. Despite this, a substantial reduction in asking rents or a price war is unlikely to occur. A significant share of the office supply in the traditional business districts is dominated by a small number of major landlords, granting them substantial holding power. For example, approximately 35.1% of the Grade A office supply in Central is owned by three major landlords, 32.0% of private office stock in Admiralty is owned by Swire Property, while 44.3% of the Grade A office stock in Hong Kong East also belongs to it.

"Overall, net effective rents of Grade A offices dropped by an additional 0.6% m-o-m in June, resulting in a total decline of 4.3% in the first half of 2024. Among the major office submarkets, Central and Kowloon East saw further rent decreases of 0.8% and 0.6%, respectively. Rents also fell in the Tsimshatsui and Kowloon East submarkets, declining by 0.3% and 0.4%, respectively," said Cathie Chung, Senior Director of Research at JLL.

Download JLL Hong Kong Property Market Monitor  >  here.