Hong Kong office landlords in ‘defensive’ mode amid supply glut, relocation trend

“The flight to quality of existing tenants within Hong Kong is absolutely going to continue with all the new supply coming in the next three to four years,” said Sam Gourlay, head of the office leasing advisory at JLL for Hong Kong Island. “We will see downward rental pressure on grade B and grade A-minus office space. Our forecast is a 5 to 10 per cent decline in office rents this year.”

Some 3 million sq ft of new premium office space is expected to enter the market in coming months – the biggest net increase in supply in 17 years. Sun Hung Kai Properties’ International Gateway Centre project in West Kowloon will contribute 2.6 million sq ft of that.

Flight to quality meant different things to different firms, he said, including better transport connectivity, improved ESG (environmental, social and governance) partnerships with landlords and larger floor plates.

Incentives landlords are offering include lower rents and lower capital expenditures for new office fit-outs.