The decline in Hong Kong’s office rents slowed in the second quarter amid rising leasing demand from finance and law firms, but analysts cautioned this trend was unlikely to substantially benefit landlords as prices are yet to recover.

Overall grade A office rents fell 1 per cent quarter on quarter compared with steeper declines in earlier quarters, according to data from Cushman & Wakefield.

Prime Central, Tsim Sha Tsui and Kowloon West recorded a milder decline in rents than districts like Kowloon East and Causeway Bay, by up to 0.6 per cent quarter-on-quarter, the data showed.

“A narrower rental decline signals that the market may be approaching greater stability, which is encouraging for both landlords and investors,” said John Siu, managing director at Cushman & Wakefield Hong Kong. “It suggests that rental corrections are slowing, and that we may be nearing a pricing floor, especially in prime locations.”

Office rents in Hong Kong have dropped by more than 42.8 per cent from a peak in 2019 due to a slump in the city’s real estate market, Cushman said in a recent report. The monthly rent in Central, which has been historically known for having the world’s most expensive office rents, has dropped to HK$89.30 (US$11.40) per square foot from HK$166.10 per square foot in January 2019.

HSBC Global Research said in a recent report that the office market was picking up amid improving financial activity in Hong Kong, but the research arm of Hong Kong’s biggest bank expected downward pressure on rents to continue. It revised its full-year forecast for the office rent decline to 5 to 7 per cent from 7 to 10 per cent previously.