Over 2 In 5 Tenants To Downsize Office Space In Hong Kong
HONG KONG – A survey by Colliers showed that 21 percent of office occupants in the Chinese territory will likely reduce their workspace over the next two years, according to a report from the South China Morning Post (SCMP) earlier this week.
This is bad news for the office market of Hong Kong, where the vacancy level of prime office space reached a record high of 15.1 percent near the end of August 2023. Data from Colliers also revealed that monthly office rents in the city have fallen sharply by 30. 3 percent to HK$54.70 psf from its peak in January 2019, when the office vacancy rate was at a record low of 3.5 percent.
In addition, Colliers said Hong Kong’s office market will see the completion of another 3 million sq ft of office space during the last six months of 2023.
Meanwhile, IWG’s Chief Executive Mark Dixon believes that hybrid work arrangements will persist and this trend will compel office landlords to turn traditional office spaces into flexible workspaces.
The trend is driving IWG to add new flexible office space in the Chinese territory. “IWG is growing its network both in Hong Kong and globally at a rapid rate as the demand for hybrid working accelerates.”
“Property owners are seeking to capitalise as businesses of all sizes embrace the model, and we can see this trend in our network growth numbers. In the first half of this year, we added more than 400 locations globally,” he noted.
In Hong Kong IWG operates 21 outlets under various coworking space brands – HQ, Regus, Spaces, Signature, and OpenOffice, with four new branches added so far in 2023.
However, Jones Lang LaSalle’s (JLL) Head of office leasing advisory in Hong Kong Alex Barnes believes that the city’s office sector could see a softer impact from the hybrid work trend than other cities.
“Hybrid caters to the needs of workers who may also have typically longer commutes and more expansive living conditions than those in Hong Kong.”
“We expect demand for flexible office space to continue in Hong Kong, albeit at a slowing pace in the medium term. A form of hybrid exists for many companies in Hong Kong, but the extent of the direct impact on office space is considerably smaller than that of other global markets,” he explained.
Furthermore, Barnes pointed out that while hybrid work arrangements offer lower costs and higher flexibility, it has some disadvantages. These include concerns about productivity and fostering corporate culture, in addition to junior workers lacking direct guidance from their supervisors.