The amount of vacant top-tier office space has more than doubled in Hong Kong over the past three years as companies downsize operations, researchers have found, warning that demand could remain soft even if COVID-19 pandemic controls are lifted.
The data add to warnings that Hong Kong’s shine as a business hub has been dulled by political unrest and a subsequent crackdown. Pandemic curbs have also kept the territory internationally isolated while rivals reopen.
Empty Grade A office space spiked from 390,000m2 to 892,000m2 in the three years leading up to March, a report by real-estate investment firm CBRE showed.
Photo: AFP
The jump came as a result of downsizing by nearly 950 companies, it said — a record high vacancy rate.
Occupancy fell by 210,000m2 in that same three-year period — sinking to 6.78 million square meters — making up Hong Kong’s “biggest and longest office market downcycle in history,” the report said.
Rents also dropped nearly 30 percent.
“The economic recession has prompted businesses to look at the office costs more carefully and reduce office footprint over the past few years,” CBRE head of research Marcos Chan (陳錦平) said.
Hong Kong had huge democracy protests in 2019, which often spilled over into core business districts and helped tip the territory briefly into a recession.
Beijing responded with a crackdown that has purged the territory of dissent and transformed its once outspoken vibe.
Meanwhile, throughout the pandemic Hong Kong has stuck to a version of Beijing’s “zero COVID-19” strategy, quashing outbreaks with travel curbs, targeted lockdowns and social distancing rules.
Foreign businesses have chafed at the strict pandemic-era border controls, which have kept Hong Kong internationally cut off, with some multinational firms relocating their regional headquarters or some staff to rival cities such as Singapore.
CBRE said that departing firms from the US, Europe, the Middle East and Asia were behind the reduced office occupancy while mainland Chinese companies saw mild growth in their footprint.
However, “there is no evidence of a widespread corporate exit from Hong Kong,” the report said.
From 2019 to this year, most sectors cut down on office space with the exceptions being the legal, real-estate and healthcare industries, as well as government departments, CBRE said.
The firm projected “gradual and moderate” growth in office demand after Hong Kong relaxes travel restrictions, citing Chinese enterprises as key growth drivers.
“New and expansionary demand from mainland Chinese companies will grow at a rate of no less than 770,000 square feet [71,535m2] per annum,” CBRE said.
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