Concrete Analysis | Hong Kong’s office vacancy at two-decade highs creates optimal window for companies to set long-term strategies
- It may take roughly three years for Hong Kong’s office market to clear 5 million square feet of excess office space with rents at decade-low
- Pressure may not ease just yet with 6.5 million square feet of new Grade A space projected to come into the market in 2022-23
Hong Kong’s current office market downturn, stretching over seven quarters from late 2019, is on par with the longest in history. The contraction in occupancy, however, is more severe this time at 3 million square feet (278,710 square metres), compared with the so-called “negative net absorption” of 1.7 million square feet between 2001 and 2003.
Coincidentally, both down cycles have seen Hong Kong suffer from a pandemic. The severe acute respiratory syndrome (Sars) outbreak 18 years ago was arguably less detrimental, given the narrower spread and shorter duration than the Covid-19 pandemic. The prelude to Covid-19, in the form of social political unrest, also agonised the city.
Overcoming the recession, Hong Kong is finally able to see the light at the end of the tunnel. Lately, most of the key economic statistics have resumed the growth trend, although a full recovery is still pending until cross-border travel is normalised.
Companies know that change is happening, and are more comfortable making real estate decisions now compared to a year ago. Office brokers are getting busier, arranging inspections and providing advice and support on real estate strategy.
Leasing volume for Grade A offices have risen for four consecutive quarters, with the first seven months reaching 98 per cent of the total in all of 2020.
This is a good indisputable sign for real property agents. What about office landlords?