HK Office Market Needs Border Reopening For Uplift
HONG KONG – Property consultancy Cushman & Wakefield (C&W) thinks demand for office space in the Chinese territory would recover significantly if the border with mainland China reopens, reported Mingtiandi on Tuesday morning (2 August, SGT).
“Increased space availability and the more attractive rental level in Hong Kong’s office market have created opportunities for occupiers to move into newer, greener buildings at a lower cost, but a broader rebound in demand will take root once the border with mainland China reopens,” said Rosanna Tang, C&W’s newly appointed Head of Business Development Services for Hong Kong.
According to the real estate consultancy’s Q2 2022 Hong Kong Office MarketBeat report, Grade A office rents across the city dipped 1.7 percent year-to-date as of June 2022. While it expects a 2 percent to 3 percent decline for the whole of 2022, Cushman anticipates a recovery during the 2nd half of the year led by core CBD districts as the 5th wave of COVID-19 subsides.
If all else remains equal, Tang thinks office tenants would gravitate towards newer office towers at the expense of ageing office buildings, unless landlords take the initiative to upgrade their decades-old assets.
“Most of the occupiers in the office sector are still looking for a cost-efficient real estate strategy. Some of the large multinational corporations would look for offices with strong green credentials because they may need to comply with certain such certifications now or potentially in the future. As such, a flight-to-quality is really a strong recurring theme that we’re seeing on the ground nowadays,” explained Tang, who leads C&W’s research and marketing functions in Hong Kong.
Data from Cushman revealed that office rents in Greater Central and Prime Central respectively dropped 1.6 percent and 2.7 percent year-to-date in H1 2022. In Kowloon East, it slid by a milder 0.5 percent, while that in Greater Tsim Sha Tsui inched up by 0.3 percent
Among the office tenants relocating to Tsim Sha Tsui was BKYO, a local fintech company that agreed to occupy 23,400 sq ft of gross office space at Gateway Tower 5 in Q2 2022. Tang said the relocation was not surprising given the local authorities’ strategy to provide support for tech-led sectors under Hong Kong’s development plan.
“The government is keen to push the new economy. This is a long-term initiative in which Hong Kong would like to boost fintech, start-ups, medical science, innovation and technology (I&T), and other such related new businesses.”
“This trend is set to stimulate new streams of demand from sectors like co-working space operators, TMT and healthcare to support Hong Kong’s office market going forward,” she added.