Hong Kong Offices Emptier Than Other Asian Cities

HONG KONG – The office vacancy level in the Chinese territory exceeds that of other key cities in Asia. Also, while Hong Kong’s borders have reopened, office landlords there are facing a tough recovery, with fewer tenants and a looming office glut, reported Reuters on Wednesday afternoon (1 March, SGT).

Based on data from real estate consultancy Jones Lang LaSalle (JLL), the average vacancy rate of prime office properties in the city climbed to more than 12 percent in Q4 2022 compared to under 10 percent in 2021.

In comparison, the office vacancy level in Singapore and Tokyo are less than 50 percent of Hong Kong’s current rate, and the office occupancy rates in these two major Asian cities are either rising or roughly unchanged.

Additionally, rents of upscale office spaces in Hong Kong have plunged by almost 30 percent since June 2019.

But the most worrying issue is the falling interest from tenants originating from mainland China. In 2022, these entities merely figured in under 6 percent of all commercial leases in Hong Kong’s Central – a far cry from the nearly 30 percent in 2019. In addition, those tenants could be slow to return amidst the continuing sluggishness in the world’s second-biggest economy.

Nonetheless, some office landlords in Hong Kong fared better than others. Hongkong Land, the largest commercial property lessor in Central, retained a coveted vacancy level of about 5 percent during the pandemic. On the other hand, CK Asset-owned Cheung Kong Center, which houses Goldman Sachs’ primary office in the city, was 21 percent vacant in 2022.

While positive signs are emerging in Hong Kong’s office market – like Invesco’s recent 10-year lease in Jardine House, in addition to the expanding presence of auction houses, Phillip’s, Christie’s, and Sotheby’s – office supply in the city is expected to increase by 3 percent or 3 million sq ft in 2023. Upcoming office completions this year include Henderson and Cheung Kong Center II.