• Hong Kong’s Grade A office market to grow by 20 million sq. ft. in the next 10 years

    1 April 2015

    HONG KONG, 24 March 2015 – New supply of Grade A offices in Hong Kong is expected to reach 20 million square feet between 2015 and 2024, according to JLL Hong Kong in its latest research on new office supply.


    The supply of Grade A offices has halved from an annual average of 3.3 million sq. ft. from 1985-1999 to just 1.6 million square feet from 2000-2014. The drop in supply has largely been a reflection of the ad-hoc government land sale programme that was in effect from 1999-2013 and high land premiums sought by the government for the redevelopment of older industrial buildings. The surge in asset prices in recent years has also made it much more difficult for developers to acquire and redevelop older buildings in the city’s traditional business districts such as Central, Wan Chai/Causeway Bay and Tsim Sha Tsui.

    With new supply falling below average take-up over the past 20 years, approximately 2 million sq. ft. per annum, the vacancy rate in the Grade A office market in traditional business districts has remained at or below frictional levels. In some segments of the market, vacancy has even dipped below 1 per cent in recent years.

    The influx of new supply over the next 10-years, however, will lead to dramatic changes in the city’s office market. Importantly, much of this new supply will be driven by government land sales. Since 2011, the government has earmarked over 20 parcels of land for office development in Kowloon East as part of the Energizing Kowloon East Office scheme. Of those yet to be sold, these sites have the potential to yield at least 12 million sq. ft. of Grade A office space. The government is also expected to release land with the potential to yield around 4.8 million sq. ft. of office development in Central and Wan Chai through reclamation and the reprovisioning of old government buildings and car parks. Across the harbour, the development of the West Kowloon Cultural District and the completion of the Guangzhou-Shenzhen-Hong Kong Express Rail Link terminus will provide a further 2.9 million sq. ft. of supply.

    Short-term office supply will be further boosted by the government’s revitalisation scheme for industrial buildings, which encourages developers to convert older industrial buildings into office use. To date, over 47 special waiver applications citing office use as a conversion option have been executed, potentially supplying the market with up to 4.7 million sq. ft. of alternate office accommodation over the short-medium term. Combined with government land sales, JLL estimates that there is provision for at least a further 20 million sq. ft. of Grade A office supply to be delivered between 2015 and 2024.

    Hong Kong’s Grade A office market to grow by 20 million sq. ft. in the next 10 years

    The dramatic change in office supply will have a wide range of implications for occupiers and investors. For occupiers, increasing supply offers a myriad of opportunities to secure cost effective offices to accommodate expansion and consolidation requirements.

    For investors, the growth of the market will, for the first time, provide investors the opportunity to acquire high quality assets in both established and emerging office locations.

    Gavin Morgan, Chief Operating Officer and Head of Leasing at JLL, Hong Kong, said: “We remain optimistic on the growth of the city’s office market led by increasing demand from companies originating from mainland China. While vacancy currently remains tight across the market, with only a few Grade A office buildings, such as Citibank Plaza, having availability to accommodate larger office occupiers, the completion of new supply over the next 10 years will slowly move the market back in the favour of occupiers.

    “New high-quality developments, including Swire Properties’ office developments in Quarry Bay and Kowloon Bay, the joint-venture development of Nan Fung Development and the Link REIT in Kwun Tong and the redevelopment of Wharf T&T Square in Kwun Tong by Wheelock Properties will provide opportunities for occupiers to secure cost-effective offices to meet their long-term business needs.”

    Denis Ma, Head of research at JLL, added: “With the emergence of Kowloon East, the rental market will need to adjust accordingly. The days of HK$200 per sq. ft. monthly rentals in Central [during 2007] are unlikely to be coming back anytime soon.”


    Natural and Organic: Red Dunes Playtopia Video credit: CHENIN Studio

    World Architecture Festival 2022 took place in Lisbon, the 2023 edition will hold from 29 Nov - 1 Dec at Singapore.


    no images were found