Hong Kong’s office rents and rateable values are expected to fall amid high vacancies, new supply, uncertainties around the global economy and downsizing by firms, analysts said.
While senior executives want staff to return to the office – and the Asia-Pacific region continues to lead the United States and Europe in this aspect – flexible working as an option is increasingly popular in Hong Kong, according to CBRE.
“Office leasing momentum has remained slow in recent months on the back of prolonged uncertainties in the global economic outlook,” said Marcos Chan, head of research at CBRE Hong Kong.
Vacancy levels rose in the first half of 2023 to 15.7 per cent and will continue to rise as new developments are completed and enter the market, said Chan, adding that rents are expected to edge down by another 1 to 2 per cent in the second half.
Leasing strategies will continue to be cautious in the short term, according to a CBRE report on the Asia-Pacific office markets published in late June.
“Despite the dismantling of pandemic-related restrictions and a return to normal life, economic uncertainty continues to persist amid rising inflation and interest rates, as well as a slower-than-expected recovery in mainland China,” the CBRE report said.
Occupiers, therefore, are expected to retain a conservative stance towards leasing in the short term, with lease renewals, renegotiations, right sizing and enhancing lease flexibility among choices available to them, according to the CBRE report. Occupiers are looking especially closely at more flexible expansion and contraction options as well as break clauses.
Occupiers also intend to explore ways to reduce space by exercising lease expirations and consolidating locations, the CBRE report added. Demand from large occupiers looking to sublease space continues to result in elevated levels of shadow space in Australia, Singapore and Hong Kong.
