Who’s to blame? Hong Kong office glut to worsen as developers add fresh supply in 2025

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Some 3 million square feet of supply will hit the market next year, likely delaying any recovery in office rentals, analysts say

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Offices in Central business district in Hong Kong. Photo: Dickson Lee

Cheryl Arcibal

Published: 9:00am, 23 Sep 2024Updated: 9:26am, 23 Sep 2024

Hong Kong’s office leasing market is in a troubling slump. Nearly a fifth of floor spaces across the city are vacant, unprecedented in the financial hub, and rents have fallen to levels last seen in 2015. Not even lower interest rates can turn this around over the next 12 months, experts say.

While businesses are not recovering fast enough to fill up the floors, the city’s landlords including Sun Hung Kai Properties, Mandarin Oriental Hotel/Hongkong Land, and SEA Holdings are partly to blame for the glut.

The trio and their peers are adding some 3 million square feet (278,709 square metres) of new office space to the market next year, property consultancy CBRE estimated. That is expected to worsen the oversupply situation, currently at an all-time high of 17 per cent across the city.

“In light of the supply overhang, it will remain a tenants’ market in 2025,” said Marcos Chan, executive director and head of research at CBRE Hong Kong. “The new supply will lead to higher vacancy by end-2025. Rents are expected to come down by roughly another 5 per cent in 2025.”

Sun Hung Kai will put 2.1 million sq ft of space into the market next year, when its International Gateway Centre in Tsim Sha Tsui is completed, according to consultancy Cushman & Wakefield. One Causeway Bay, a Mandarin Oriental and Hongkong Land project, will add 410,400 sq ft, while SEA Holdings will inject 310,700 sq ft from its Kowloon East development.