Kowloon East to become Hong Kong’s No 1 office market in 10 years, says CBRE
Thanks to low vacancies in traditional business districts, bulk of office development and leasing activity will be focused in Kowloon East, West Kowloon and Wong Chuk Hang
Kowloon East will replace Central as Hong Kong’s largest office market in terms of total supply in 10 years, according to a report published on Tuesday by real estate services and investment company CBRE.
Grade A office floor area in Kowloon East will expand to 7 million square feet in 2021 and 29 million sq ft in 2026, surpassing the current stock of 22 million sq ft in Central, Admiralty and Sheung Wan.
The new supply will be spread across four clusters – Kwun Tong, Ngau Tau Kok, Kowloon Bay and Kai Tak.
Grade A office rents in Kowloon East are only a quarter of those in Central, where strong demand from mainland Chinese firms has pushed up rents to a record high.
And in the wake of the low vacancies in traditional central business district areas, CBRE believes the bulk of office development, investment and leasing activity will be focused on emerging submarkets such as Kowloon East, West Kowloon and Wong Chuk Hang in the next five to 10 years.
“Kowloon East is not a submarket for back offices,” said Marcos Chan, CBRE’s head of research in Hong Kong, southern China and Taiwan. “At present, 34 of the 50 largest occupiers in Kowloon East perform a head office role either for Hong Kong or Asia-Pacific.”
Kowloon East will also outperform other emerging districts, including West Kowloon and Wong Chuk Hang, the report said, as it can tap an existing cluster of banks and insurers, superior infrastructure projects planned by the government and a community able to supply one million workers to companies.
But the unique leading status of Central is unlikely to change, as most large companies would still want a place on Hong Kong Island, said Thomas Lam, the head of valuation and consultancy at Knight Frank Hong Kong.
Once an industrial area home to many factories, Kowloon East was zoned to become the city’s second central business district by the government in as early as 2011.