Knight Frank: Supply of Grade A office buildings in Kowloon District is expected to peak, with rental prices projected to rise steadily over the next few years.

Over the past decade, the Kowloon office district has matured, with rental prices experiencing fluctuations. Knight Frank believes that the demand for prime office space in Kowloon remains strong, while supply is nearing its peak, indicating that rental prices have stopped falling and may steadily rise in the coming years. According to Knight Frank, the current vacancy rate in Kowloon is approximately 14.5%, which has doubled compared to a decade ago. However, Knight Frank's Managing Director for the Greater Bay Area, Mike Kwan, explained that the overall occupancy of commercial buildings in Kowloon is actually better than it was ten years ago. A decade ago, the total stock of Grade A office space in Kowloon was about 28.5 million square feet, which has now increased to around 45.2 million square feet, representing a growth of nearly 60%. This significant increase is primarily due to a surge in supply, with the stock of Grade A offices in East Kowloon nearly doubling over the past ten years, while West Kowloon has also developed rapidly, giving tenants more choices and greater bargaining power. The actually occupied space has still net increased by over 12 million square feet, indicating that demand has not disappeared; it has merely been met with faster supply. Regarding rental prices, Knight Frank's Executive Director and Head of Kowloon, Wu Chi-fung, pointed out that rental prices have dropped by about 30% over the last decade, mainly due to increased supply. Tenants are also adapting to changing market conditions with more choices in office selection. On average, there are 2 million square feet of new completions each year, gradually shifting from a landlord's market to a tenant-led market.