Hong Kong office vacancies double after protests and pandemic
The number of vacant prime office spaces has more than doubled in Hong Kong over the past three years as businesses scale back.
Researchers warn that demand could remain weak even if pandemic controls are lifted.
The data adds to warnings that Hong Kong’s luster as a business hub has been dulled by political unrest and a subsequent crackdown. Pandemic curbs have also kept the city isolated internationally as rivals reopen.
Class A empty office space rose from 4.2 million square feet to 9.6 million square feet in the three years to March, according to a report by real estate investment firm CBRE.
The record vacancy rate is the result of downsizing nearly 950 businesses, he said.
Occupancy fell by 2.3 million square feet over the same three-year period – falling to 73 million square feet – constituting “the biggest and longest cycle of downturn in the Hong Kong office market history,” CBRE reported.
Rents have also fallen by almost 30%.
“The economic downturn has prompted companies to take a closer look at office costs and reduce office clutter in recent years,” said Marcos Chan, head of research at CBRE.
Hong Kong saw huge and at times violent democracy protests in 2019, which often spread through major business districts and helped tip the city briefly into a recession.
Beijing responded with a crackdown that purged the city of dissent and transformed its once outspoken vibe.
Meanwhile, throughout the pandemic, Hong Kong has stuck to a version of Beijing’s zero Covid strategy, quashing outbreaks with travel restrictions, targeted lockdowns and strict social distancing rules.
Hong Kong was largely virus-free until earlier this year, when the highly transmissible variant of Omicron spread, killing more than 9,000 people and leaving the city with one of the highest per capita death rates the highest in the world.
Foreign companies have chafed at tight pandemic-era border controls that have kept Hong Kong isolated internationally, with some multinational companies opting to move their regional headquarters or some employees to rival cities like Singapore.
CBRE said companies departing from the United States, Europe, the Middle East and Asia were driving the reduction in office occupancy, while companies from mainland China saw a slight growing their footprint.
But he said “there is no evidence of a widespread exit of businesses from Hong Kong.”
Between 2019 and this year, most sectors have reduced their office space, except for the legal, real estate and health sectors, as well as government departments, CBRE said.
The company forecast “gradual and moderate” growth in office demand after Hong Kong eased travel restrictions, citing Chinese businesses as key growth drivers.
“New and expansionary demand from mainland Chinese businesses will grow at a rate of at least 770,000 square feet per year,” CBRE said.