Hong Kong’s reopening to revive office market from its longest and deepest slump, but upswing in rents will have to wait

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The reopening of Hong Kong’s borders and a stabilising pandemic will act as a catalyst for moribund office market, says Swire Properties’ Don Taylor

Additional office space of 8.2 million sq ft expected from 2022 to 2024 and record high vacancy rates are likely to push rents lower this year and next, says CBRE

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The current downturn in Hong Kong’s office property market has been described by CBRE as its ‘longest and deepest’. Photo: Roy Issa

Cheryl Arcibal

Published: 1:30pm, 9 Oct 2022Updated: 2:18pm, 10 Oct 2022

Demand for office space in Hong Kong will receive a boost from the city opening up to the rest of the world, but the segment still faces significant headwinds in the short to medium-term, according to one of the city’s largest landlords.

“With the gradual reopening of the international borders and the pandemic starting to stabilise, we anticipate that this could prove to be a catalyst for demand,” said Don Taylor, director of office at Swire Properties, noting that this would allow in-person inspections of real estate and also removes some of the uncertainty for international companies with regional offices here.

There is no doubt that, in the short to medium-term, the Hong Kong office market is up against some uncertainty, he added. “Given the current state of the Hong Kong economy, slowing growth in the Chinese mainland, the imbalance between demand and supply in the local office market, as well as the real threat of a global recession, rents are likely to remain under pressure into next year.”

But, given Hong Kong’s growing importance to the future of the Greater Bay Area and as a global financial centre, there will be continued demand for high quality grade A office space, he said.

The city’s economy shrank 1.4 per cent in the second quarter of this year, following a 3.9 per cent contraction in the first three-month period, confirming fears that stringent social-distancing curbs had affected economic activity far more adversely than initially estimated. In August, the government further cut its annual forecast for the city’s economy to between 0.5 per cent growth and 0.5 per cent contraction. It previously estimated growth of 1 to 2 per cent.