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Office leasing shows signs of recovery while rate hike weighs on demand and prices in the investment and residential sectors

HONG KONG SAR, 12 October 2022 - Leading diversified professional services and investment management company Colliers (NASDAQ and TSX: CIGI) has released its Quarterly Reports for Q3 2022, which saw continued recovery in the overall office leasing market alongside a slowdown in the investment and residential sectors.

“As Hong Kong emerged from the fifth wave of Covid-19, sentiment in the office leasing market improved with a positive net absorption. At the same time, Grade A office vacancy increased due to an influx of new supply while we also observed a continued flight-to-quality trend that will likely weigh on sub-par buildings. The investment and residential markets were more impacted by the US Federal Reserve interest rate hike, which resulted in a wait-and-see approach among investors and lower price expectations among homebuyers. We expect investment demand to pick up with the end of hotel quarantine requirements while residential prices will continue to contract,” said Kathy Lee, Head of Research at Colliers Hong Kong.


Following the fifth wave of the pandemic in H1 2022, the overall office leasing market registered a net take-up of 577,000 sq. ft. in Q3 2022. While leasing activities picked up, three new office buildings in Island East and Kowloon East came on stream in Q3 2022 with a total office Net Floor Area (NFA) of 1.8 million sq. ft., elevating the overall vacancy to 12.6%.

Overall Grade A rent declined by 1.5% QoQ in Q3 2022, with cost optimisation remaining the focus for inter-district relocation. Rents in Kowloon East and West rose slightly by 0.9% and 0.4% QoQ respectively, while rental adjustment persisted in the Wan Chai and Causeway Bay sub-markets of Hong Kong Island, registering a considerable rental contraction of 2.4% QoQ.

“Looking ahead, we expect the rental level to remain relatively steady until the end of 2022. The relaxation of travel restrictions, including the end of mandatory hotel quarantine in late September, will also drive office leasing demand from multinational corporations. With a projected pipeline of 3.3 million sq. ft. of new Grade A office supply, we expect flight-to-quality moves will further polarise the vacancy of Grade A offices in the same district, reflecting the significant variation in building quality. Buildings that cannot maintain quality in line with peers are expected to suffer pressure in rent and vacancy,’ said Alex Lam, Executive Director of Office Services at Colliers Hong Kong.

Capital Markets and Investment 

The US Federal Reserve’s interest rate hike continued to weigh on investment sentiment in Q3 2022, with only 26 major deals recorded. This represented a reduction of 16% QoQ and 49% YoY, despite some big-ticket sales and more assets coming to the market in receivership. Even the industrial sector, which was popular among investors in 2022 due to robust demand for cold storage and data centres, only recorded a total transaction consideration of HK$2.6 billion in Q3 2022, representing a fall of 73% QoQ.

‘We expect retail assets to become more attractive to investors in the wake of the relaxed quarantine measures. Neighbourhood malls can provide a resilient income stream, while high-street shops in core districts show strong upside potential once the border is reopened. Meanwhile, industrial assets will continue to be sought-after by institutional investors. As the market digests the interest rate news and the end of hotel quarantine encourages foreign investors to resume their property hunt, Colliers forecasts transaction volumes will increase by 15% YoY in 2022, barring any further headwinds and subject to the successful completion of several office and retail deals in the city,’ said Thomas Chak, Co-Head of Capital Markets & Investment Services at Colliers Hong Kong


The US Fed’s interest rate hike also weighed on the residential market, elevating mortgage rates and minimum income requirements for buyers who in turn expected lower prices for private housing. The widening gap in price expectation between buyers and sellers resulted in a decline in the quarterly transaction volume in the second-hand residential market of 32.3% YoY in Q2 2022. 

After analysing 2,823 second-hand residential transactions that closed from July to September 2022, Colliers found that sellers have started to accept the new price expectations and cut their asking prices. This trend was most obvious for small flats of less than 400 sq. ft., as 26% more such deals recorded a 5% to 20% discount.

“According to statistics from the Land Registry, only 5.7% of residential transactions with buyer’s stamp duty prior to the social unrest in 2019 and Covid-19 outbreak in 2020 were charged to non-citizen buyers. Therefore, we foresee opening the border may not be able to reverse the residential price downturn trend and the residential price adjustment is likely to accelerate in the coming six months. We expect the prices will further contract in 2022 by 10% to 12% YoY, with small-sized residences likely to suffer the most compared to other types of housing,’ said Dorothy Chow, Executive Director, Valuation & Advisory Services at Colliers Asia.  

Media Contact:

Alex Kaihau
Marketing & Communications 
+852 5971 3234

Nora Wong
Marketing & Communications 
+852 6105 1336

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Kathy Lee

Senior Director | Head of Research


Hong Kong

Kathy is an industry-leading expert with over 18 years of experience in property research, retail advisory and town planning consultancy in Hong Kong.

As the Head of Research, Kathy has three areas of focus: to build a leading real estate database, develop leading insights and recommendations, and lead the conversation around the core real estate sectors.  

She has led multiple retail planning projects and advised a diverse range of developers, government entities and international retailer clients in both domestic and international markets. 


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Alex Lam

Executive Director

Office Services

Hong Kong

Alex has over 25 years experience in Hong Kong providing tenant advisory services to multi-national corporations and publicly listed companies He specializes in formulating and implementing real estate strategies for clients in aspects of office leasing negotiations, rent reviews and lease restructure.

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Thomas Chak

Co-Head Capital Markets & Investment Services

Capital Markets & Investment Services

Hong Kong

Being an award-winning industry specialist, Thomas is highly regarded amongst his peers and clients with over 18 years’ property investment experience. The key client focus of Capital Markets remains institutional clients, local investors and developers, family offices and private high net worth individuals as well as PRC inbound capital. 


Thomas develops and fosters partnership and consultancy based approaches to clients, resulting in improved profitability through high client retention rates and improved business profile. 


Thomas has joined Colliers as Executive Director of Capital Markets in July 2019. In a way, this is a homecoming for Thomas as he was with Colliers’ Capital Markets team between 2006 and 2008.  Prior to joining back Colliers, he was with Knight Frank as Senior Director of Capital Markets, where he completed transactions of over HK$8 billion.   

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Dorothy Chow

Executive Director | Asia

Valuation & Advisory Services

Hong Kong

Dorothy is a qualified general practice surveyor.  She has over 24 years'  experience specializing in valuation, land matters and property development.  She has solid experience on valuation and advisory matters including:

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  • Valuation for litigation
  • Valuation for compulsory sale of land for redevelopment 
  • Valuation for rent review
  • Rates, tax and stamp duty negotiation with the Government
  • Land and development matters
  • Development consultancy to public bodies and corporates

In her career, Dorothy  has developed strong relationships with numerous developers, investors, and institutional clients,  She has particular experience in providing support to legal actions and rent reviews.

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