HK Developers To Create More Flexible Rental Offers To Attract Businesses

BY Realty+

Hong Kong’s real estate developers need to create more flexible rental offers to attract businesses, as the city will have more than 246 football fields with an oversupply of office space by 2025.

As Covid-19 isolation policies have plunged Hong Kong’s economy into recession, companies, and banks such as Société Générale and Deutsche Bank have shrunk in the area over the past two years. Pandemic measures have also led to an exodus of foreign and local residents and interrupted the return of mainland Chinese groups expected to occupy space.

“The lease market, if it’s not at the bottom, it reaches the bottom and will stay for some time. There is a lot of room to absorb and digest,” said Paul Yien, Executive Director of Office Leasing Advice at JLL in Hong Kong. “There is a lot of new offer which puts pressure on rental.”

The higher vacancy rate is already affecting developers, who over the years had become accustomed to easy profits thanks to the tight supply of land. Henderson Land Development, one of Hong Kong’s largest property developers, reported a 34 percent year-over-year profit decline to HK$5.1 billion (US$650 million).

In a rare move in a city where landlords have long ruled, some tycoons are introducing more flexible contracts to attract tenants. New World Development, run by the Cheng family of Chow Tai Fook, is offering a six to a nine-month cooling-off period for its new 11 Skies project near the Hong Kong airport, two people familiar with the matter said.

Hong Kong has always had the most expensive real estate market in the world, due to its limited space and strategically important location next to South China’s manufacturing and technology center in Guangdong Province.

CBRE Group, the real estate investment firm, estimated vacancy rates in the city at 11.9 percent at the end of the first half, the highest since the third quarter of 2003, with 9.8 million square feet available. According to real estate agent Colliers, the vacancy rate of offices had risen to 12.3 percent in August.

Savills, the real estate company, estimates that a total of 17.2 mn sq ft of A-class office space will be available over the next four years, with an expected annual take-up of 1 mn sq ft per year, leading to oversupply. good for almost 250 football fields.

Panasonic, Nielsen, Deutsche Bank, Standard Chartered, Nomura, UBS, BNP Paribas, Société Générale and National Australia Bank have all been phased out in the city over the past two years.

Tags : Hong Kong real estate developers Société Générale Deutsche Bank residents JLL Paul Yien Executive Director Office Leasing Advice JLL CBRE