Hong Kong Office Space Demand To Be Lifted By Border Reopening
HONG KONG – Experts think that demand for office space in the Chinese territory would be pushed up by the reopening of Hong Kong’s border with mainland China and the rest of the world, reported the South China Morning Post (SCMP) on Sunday noon (15 January, SGT).
However, office rents in Hong Kong are unlikely to increase substantially this year, with some real estate analysts forecasting a 3 percent uptick, while some are expecting a contraction of up to 10 percent.
For instance, CBRE Hong Kong’s Head of advisory and transaction services for office services Ada Fung expects office rents in the city could fall by up to 5 percent.
Still, “we are seeing a potential demand recovery, particularly from Chinese firms that will support leasing activity for 2023, thanks to the border reopening, while (multinational corporations) will continue to stay cost-cautious on expansion plans due to global economic headwinds and high financing costs.”
“However, cost control and escalating vacancy pressures will continue to weigh on rents until demand is strong enough to reverse this trend,” she explained.
Another negative factor is that new office supply in Hong Kong is expected to reach a record high of 14.5 million sq ft this year, disclosed CBRE Hong Kong’s Research Head Marcos Chan.
“We will continue to see a supply boom coming into the market, so we do expect the vacancy level will continue to go up from 14.6 percent currently. We forecast that by the end of 2023, the market vacancy level will be getting closer to 16 percent if all new supply or the pipeline is completed in the next 12 months.”
Meanwhile, Savills said the pace of the city’s office market recovery and supply glut will likely temper any expansion by mainland Chinese companies. Notably, the property consultancy expects office rents to fall by 10 percent year-on-year in 2023.
“The rebounding stock market, a loosening of most COVID-19-related measures, as well as the scheduled border reopening with the mainland, are all positive spins for office demand, but uncertainties linger given hangover vacancy from 2022 completions, and concerns over the speed of recovery,” added Simon Smith, Regional Head of research & consultancy for Asia Pacific at Savills.