Hong Kong Office Vacancy Hits 11.3% In July

HONG KONG – Data from real estate consultancy Colliers showed that the overall vacancy rate for Grade A office space in the Chinese territory reached 11.3 percent in July 2022, according to a report published on Thursday (8 September, SGT).

While this represents Hong Kong’s highest office vacancy level since the 2008 Global Financial Crisis as social unrest and the virus outbreak had significantly impacted the city’s economy over the past three years, eco-friendly office builds fared better.

Colliers said certified eco-friendly office buildings outperformed in terms of vacancy levels, with 79 percent of them recording a vacancy that is lower than their district average.

On average, sampled green office buildings had a lower vacancy of 4.3 percentage points (ppt) than non-green office towers within the same submarkets in Hong Kong.

Moreover, the preference for green office buildings appears to be growing in Hong Kong, as about 85 percent of the office supply (net floor area) for next year are certified as eco-friendly.

However, turning an office property green can be expensive. Colliers estimates that office landlords may need to spend 5 percent to 20 percent of a building’s investment value to transform it into a green asset. However, the high cost can be offset by a reduction in operating expenses once the building is completed

Meanwhile, Colliers data revealed that Hong Kong’s Grade A office rent plunged 20.6 percent in July 2022 from its historical peak in early-2019.

“We foresee 15 million sq ft of Grade A supply entering the market from 2022 to 2026. The expansion will naturally weigh on sentiment as the market struggles to digest the average of 3 million sq. ft. per year, which is still higher than 2010’s net uptake – the year of recovery from the Global Financial Crisis,” said the real estate consultancy

“We believe this new supply will take years to digest. Tenants will have a wide variety of options by then, so retaining existing tenants and attracting new occupiers becomes a headache for landlords,” added Colliers.