Hong Kong Office Market

Hong Kong Office Market Faces Biggest Glut

HONG KONG – Despite the expected positive impact from the reopened border with mainland China, the Chinese territory’s office sector is poised to see its largest office oversupply in almost 2 decades, reported Nikkei Asia on Wednesday noon (11 January, SGT).

Cushman & Wakefield (C&W) forecasted that 1.9 million sq ft of new office space will be added this year, likely raising overall office availability to 19 percent by the end of 2023. The property consultancy said the city has not seen that amount of office oversupply since Q1 2004. As for Colliers, it expects 3.2 million sq ft of net floor area would enter Hong Kong’s office market this year.

Among the new office buildings expected to be completed this year are The Henderson and the 41-storey Cheung Kong Centre II. In particular, the latter has a gross floor area (GFA) of 550,000 sq ft.

Moreover, data from CBRE showed that the overall Grade A office vacancy in Hong Kong reached an all-time high of 15.1 percent last year. Apart from being more than two times pre-pandemic levels, it exceeded levels not seen in more than 20 years.

Amidst China’s economic uncertainty, analysts said the significant number of newly finished office developments in Hong Kong could keep the city’s office market’s supply and demand out of balance in the coming months.

“I believe the recovery in the leasing demand will be gradual rather than ‘a rush’, and mainland firms related to banking and finance, as well as insurance sectors, are expected to be more active,” said C&W’s Research Director for China & Hong Kong, Rosanna Tang.

She revealed that mainland Chinese firms such as Huawei Technologies and brokerage Huatai Financial agreed to lease over 10,000 sq ft of office space in Hong Kong in Q4 2022.

Market watchers think that mainland Chinese companies will lead office leasing demand after office rental activity ground to a halt for the past 3 years due to strict quarantine rules for anyone travelling between Hong Kong and the Chinese mainland.

“Financial firms, largely security firms, and wealth management companies, will continue to form a major source of office demand from across the border,” noted CBRE’s Research Head for Hong Kong Marcos Chan.

“Medical groups are also expected to explore business opportunities in Hong Kong for its ageing population and comprehensive insurance coverages.”

Despite the likely office glut in Hong Kong, Colliers expects rents of office space in Central could increase by 4 percent this year thanks to demand for prime workspace led by Chinese firms. As for Jones Lang LaSalle (JLL), it foresees a 5 percent office rental growth for the whole of 2022.

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