Letters | What Hong Kong can do to improve its office occupancy rate

Readers discuss viable measures to control supply and raise demand, visiting mainland China on the new travel permit and how Malaysia should handle South China Sea tensions

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The high vacancy rates of Hong Kong offices show no sign of abating. Photo: May Tse

Published: 11:30am, 30 Oct 2024

The high vacancy rates of Hong Kong offices, in particular grade A offices, appear to show no sign of easing, according to recent data compiled by property consultancies CBRE, JLL, Savills and Cushman & Wakefield. I understand that this could be attributed to an increase in supply in grade A offices in the core business areas. While there are reportedly cases where companies relocated from noncore areas back to core areas, spurred by competitive rental adjustments in prime locations, unfortunately these relocations are inadequate in suppressing vacancy rates.

Some people point out that Hong Kong’s office vacancy rates – at around 13 per cent – align with those in other major cities in the world. However, one should compare the performance changes in a market with the market’s own historical data. As such, the sharp rise in Hong Kong’s vacancy rate warrants concern.

Given the post-pandemic changes in our mode of work and today’s cost-conscious tenants, I do not see how the office vacancy rate could be lowered in the short term of six to 12 months. What can be done, then?

From the point of view of controlling supply, town planning rezoning could be viable. Areas zoned for commercial use can be rezoned to allow for other uses, such as residential. While this measure would take time and its effect might not be immediate, this systemic change could prevent a repeat of such oversupply in the future.

As for the current stock, allowing changes to the user clause in government land leases at a low cost could be useful. Apart from the town planning zoning, the permitted use of a building is also bound by the government lease, commonly known as the land grant, which is a private contract signed between the government and the land owner. If the permitted uses under government lease could be widened from “for office use only” to include “commercial” and other uses, it would allow offices in the noncore areas currently suffering high vacancy rates to seek other tenants.

From the point of view of expanding demand, the current policy drive to encourage the setting up of family offices would be helpful, but those tenants might not be able to digest a very significant amount of space. The government should consider more radical changes, such as offering economic incentives to attract sizeable foreign companies to set up offices in Hong Kong. This could kill two birds with one stone, increasing the occupancy rate in offices while raising Hong Kong’s prestige as a base for reputable businesses and trades.