Net absorption stood at -119,000 sq. ft. in Q3 2021, the eighth consecutive quarter of negative net absorption since the current market downcycle commenced in mid-2019. This downcycle is now the longest and deepest in the city’s history.
However, the magnitude of negative net absorption continued to moderate from previous quarters thanks to an uptick in new leasing volume.
Overall vacancy increased over the quarter, with pressure more prominent in Wan Chai/Causeway Bay and Hong Kong East. Vacancy fell in Kowloon East and was stable in Greater Central.
While still limited, leasing demand was broad based and from a range of industry sectors. Most new leases involved relocation, with several downsizing moves also observed. Chinese firms remained relatively quiet.
Stronger leasing momentum ensured the rental decline moderated in Q3 2021, with three of the city’s five major submarkets seeing rents fall by less than 1% q-o-q. Rents are expected to edge down further over the next 12 months.