According to a report released by Savills, the rental decline of commercial buildings in Hong Kong generally slowed down in the first quarter, but enterprises continued to downsize, and there may also be oversupply in the next two years, which will put pressure on the rent trend. The overall rent of A buildings continued to fall 3.5% in the first quarter of this year, less than the 5.1% drop in the last quarter of last year, and it was the seventh consecutive quarter of decline. Rents on Hong Kong Island fell by 4% in the first quarter, while rents in Kowloon were relatively stable, falling 2.8% on a quarter-on-quarter basis.

According to the report, the overall vacancy rate of office space in Hong Kong rose slightly to 8.9% in the first quarter from 8.3% at the end of last year, with the vacancy rate on Hong Kong Island rising from 6.8% to 7.4%. The vacancy rate in Central rose slightly from 7.3% to 7.6% during the quarter, a 15-year high. The vacancy rate in Kowloon has increased from 10.3% to 10.8%, while Kowloon East (13.8%) still has the highest vacancy rate in Kowloon.

The bank said that more multinational banks have implemented the work-from-home policy, coupled with the bleak business prospects, major foreign banks have reduced their leasing space by more than 350000 square feet in the past 12 months. Mainland enterprises have remained active in the Hong Kong office market, renting commercial buildings in the core areas.

Savills said that vacant floor space is now more than 5.3 million square feet, and the vacancy rate is expected to rise above 10% unless office demand rebounds sharply, but this is unlikely to happen for now. Rents will continue to weaken next year.