Rental declines have generally moderated for now, but corporate downsizing continues and 2022 and 2023 threaten a supply overhang.

• The rate of rental decline fell to 3.5% in Q1/2021 from 5.1% in the previous quarter, representing seven consecutive quarters of falls.
• Wanchai/Causeway Bay (-4.3%) registered the largest rental fall among all sub-markets, partly because of its exposure to co-working operators and financial services firms.
• Central posted a 15-year high vacancy rate of 7.6% or 1.2 million sq ft in Q1/2021.
• Major international banks have shed over 350,000 sq ft of space over the past 12 months as Work-From-Home policies were implemented or extended and business prospects dimmed.
• PRC corporates remain active in the office leasing market, taking up space in core areas.
• A substantial IPO pipeline this year will support demand from a range of associated banks and professional services providers.
• The impact of extremely limited supply in 2020 and 2021 has been more than offset by shrinking demand which has meant several quarters of rental declines. As demand begins to recover later this year, however, substantial new supply in 2022 and 2023 should see rents come under further downward pressure.