JLL: Grade A office rents and prices are expected to drop by more than 10% next year. Minor renovations can help retain tenants.

Jones Lang LaSalle (JLL) latest research report pointed out that currently, nearly half (44%) of Grade A office buildings in Hong Kong with a total floor area of about 1 billion square feet are over 30 years old, and this proportion is expected to rise to 55.1% by 2030. By 2035, about one-fifth of Grade A office floor area may face functional obsolescence, making it difficult to attract tenants. The report also mentioned that by 2026, Grade A office prices and rents will drop by more than 10%, while the value of commercial buildings over 30 years old and lacking maintenance could potentially drop by as much as 20%. With high vacancy rates in commercial buildings, Jones Lang LaSalle (JLL) believes that owners of commercial buildings can consider small-scale renovations and upgrades to cope with new supply and changing trends. These investments are relatively low-cost and have a quick return on investment, while also helping retain tenants and prevent further deterioration of vacancy rates. Senior Director of Research at Jones Lang LaSalle (JLL), Trisha Tso, stated that 97.4% of Grade A office buildings in Hong Kong's core business districts were built before 2015, higher than in other international cities. With aging commercial buildings, it is expected that 8.3 million square feet of Grade A office space will enter the market in the next 5 years, equivalent to the total absorption over the past 10 years. Market competition is expected to intensify. Older properties that fail to upgrade and renovate in a timely manner may struggle to meet tenants' increasing expectations, leading to rental pressures, rising vacancy rates, decreased operational efficiency, and declining property prices.