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CBD Grade A1 offices lead rental recovery with +3% growth to outperform other office sector’s submarkets

HONG KONG SAR, 20 September 2021 – Leading diversified professional services and investment management company Colliers (NASDAQ and TSX: CIGI) has today released the Colliers Radar  ‘Revisiting the CBD Grade A office space’. Through revisiting the landscape of the current CBD Grade A office market, the report explores the different dynamics of the submarket and provides recommendations for landlords and occupiers.

In the last decade, decentralisation became a popular occupier strategy due to tight availability and high rents in the CBD area. But since H2 of 2018, Hong Kong’s Grade A office market has started to enter a correction phase as US-China trade tensions, social unrest and the COVID-19 pandemic gradually unfolded. Office space availability has consequently been increasing across different submarkets, including the CBD area. CBD rents have become more attractive and affordable, which were down by 26% from its last peak in March 2018. 

“Lower Grade A office rents have narrowed the rental gap between the CBD area and other submarkets. Coupled with the new office supply around Central in the next three years, there should be more recentralisation and flight-for-quality options within the CBD area for occupiers,” said Rosanna Tang, Head of Research, Hong Kong & Greater Bay Area.  

“We believe the CBD will continue to outperform other office submarkets, driven by the upcoming relatively limited office space supply versus solid demand from mainland Chinese companies for office space in the CBD, and increasing flight-for-quality moves from occupiers. Being the flagship prestige location supported by strong connectivity and pedestrian elevated walkways where nowhere can replace, the CBD area will remain the most important business district in Hong Kong over the next decade,” added Tang.

Banking and finance occupiers the demand-driver for CBD prime office space

The CBD area has always been one of the most favourable submarkets for banking and financial sector occupiers. We believe this will remain unchanged, backed by the new financial initiatives aimed at improving Greater Bay Area development. As of August 2021, tenants of banking, finance and insurance sector occupied the most Grade A office space in the CBD (39%). This trend is more apparent for the Grade A1 office in the CBD where the proportion is 63%.

Mainland Chinese companies to take another 2.5 million sq. ft. in CBD by  2025  

The CBD area is a sought-after location for mainland Chinese companies, in particular state-owned enterprises. Various cross-border financial integration initiatives will continue to stimulate office demand from these companies, and they will be even more active in looking for CBD office space after the borders re-open. 

The number of mainland companies in Hong Kong grew by 77% between 2016 and 2020, from 1,123 to 1,986, which demonstrates a strong appetite in Hong Kong office space. This is also supported by being the number one global IPO market for seven out of the 12 years between 2009 and 2020 according to HKEx. This has resulted in the attraction of major mainland tech giants listing in Hong Kong such as Alibaba,, Xiaomi and NetEase.

“Assuming the number of new mainland companies reaches the projected 30% growth estimates of 2,580 by 2025, and with each taking an average office space of 7,000 sq. ft., we forecast new office demand from these companies to increase by 4 million sq. ft. Interestingly, around 60% of the new lettings from mainland companies were in the CBD since 2016, suggesting 2.5 million sq. ft. of the estimated 4 million sq. ft. of potential new mainland demand will go to the CBD by 2025,” said Fiona Ngan, Head of Office Services.  

Well-located prime buildings are leading rental and occupancy recovery in CBD 

We expect to see a more pronounced divergence in rental and occupancy performance between prime and less-performing office buildings.   
CBD Grade A1 offices witnessed a three-month rental growth of 3% from May to July 2021. Amongst the 48 Grade A offices tracked, seven buildings in the CBD witnessed rental rebound, with most of them having reputable landlords, better quality and good accessibility. The above suggests prime buildings are leading rental recovery in CBD.

Through analysing the last five years’ occupancy, we identified 10 less-performing Grade A buildings in the CBD area. Eight of them shared two common features: being strata-titled and ageing over 30 years.

“Despite vacancy rates in the CBD reaching a recent high of 8.4% in May 2021, overall vacancy rates are skewed by certain ‘underperforming’ assets. Omitting outliers yields a healthier vacancy rate of 6.4% for CBD Grade A office as of July 2021,” said Chris Currie, Head of Occupier Services, Hong Kong.

“With flight-to-quality being a noticeable trend amid a tenants’ market, landlords are having to innovate and on occasion reposition their properties in order to respond to changing needs from occupiers in a post-pandemic landscape,” added Currie.

To find out more about the CBD office market, click here to download the full Colliers Radar.

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Fiona Ngan

Head of Office Services

Office Services

Hong Kong

Fiona Ngan is the Head of Office Services and she has 26 years in this field and presently focuses on leading the Hong Kong and Kowloon Office team. Her strengths include project leasing and the provision of a board range of client services, particularly in Tenant Representations. She has extensive experience in business development, real estate strategic solutions and a range of consultancy services.

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Rosanna Tang

Head of Research, Hong Kong & Greater Bay Area


Hong Kong

Rosanna Tang leads the research team in Hong Kong and South China in Colliers. Driving different research papers and client-orientated initiatives, Rosanna has a deep understanding of all property sectors, research products, and client requirements. Rosanna is also one of the spokespersons in the company, and she frequently speaks in different industry events and media interviews. 

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