Hong Kong Office Rental Market Recovers After Two Years of Decline
Hong Kong’s office rental market has started to recover after multiple quarters of decline, as the negative impact of the Covid-19 pandemic and social unrest in 2019 continue to fade, a recent report shows.
Net absorption of office space in the Asian financial hub — the amount of new rentals minus the amount of office space vacated — was 327,700 square feet in the third quarter, according to a report released Tuesday by real estate service provider Cushman & Wakefield. This was the first time that the measure rose into positive territory since the third quarter of 2019.
In the first nine months this year, however, net absorption of office space in the city was still a negative 764,200 square feet. The gauge recorded a negative 2.3 million square feet in 2020, when businesses were hard hit by the pandemic.
The recovery in the third quarter was driven by banks, insurance firms, business centers and shared workspaces, said Keith Hemshall, head of Hong Kong office leasing at Cushman & Wakefield.
In the third quarter, investment bank China International Capital Corp. Ltd. expanded its office space at the International Finance Centre in the city’s Central neighborhood by 45,000 square feet, the report showed. Fund company Schonfeld Strategic Advisors LLC expanded its workspace by 17,200 square feet in the period, and HSBC Holdings PLC added 15,100 square feet of new workspace.
Accordingly, the office space availability rate in Hong Kong — the portion of total rentable space coming onto the market over the coming 12 months — fell to 13.9% in the third quarter, down from 14.4% in the previous quarter, the report showed.
John Siu, managing director for Cushman & Wakefield’s Hong Kong operations, expected the city will see net absorption of office space stay in positive territory in the fourth quarter. The availability rate is also expected to remain stable in the period.
Office rents fell 1.2% quarter-on-quarter in the third quarter, smaller than a 1.4% decline in the second quarter. Siu expected office rents will drop between 4% and 6% in 2021.
Some hold a less positive view. Ricky W.K. Lau, head of office leasing for Savills PLC’s Hong Kong business, expected local office rents will fall 10% this year due to the region’s uncertain economic prospect, as well as fluctuating demand from Chinese companies.
Contact reporter Tang Ziyi (firstname.lastname@example.org) and editor Joshua Dummer (email@example.com)
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