Hong Kong office rents expected to decline 30 per cent this year, as work from home becomes more common in mid to long term

Hong Kong’s office leasing market faces a new low this year, with rents declining by as much as 30 per cent, as companies assess their need for space and adopt work from home arrangements because of the coronavirus pandemic, analysts said.

Office rents in the city’s Central business district fell by 17 per cent to 18 per cent in the first half of the year, and could drop by between 25 per cent and 30 per cent for the whole year, said Jeff Yau, a Hong Kong property sector analyst at DBS Bank (Hong Kong).

“The office market is worse than the city’s housing market. Corporate downsizing is very common -there is no expansion plan really,” he said.

Working from home is expected to become a trend in the mid to long term, particularly among Hong Kong’s finance, technology and foreign companies, as cost saving becomes an immediate priority for a majority of firms because of the pandemic.

“Do they need so much space? It will be different from before,” Yau said. “Companies will definitely assess their office needs again in the coming 10 years.”

Last month, Central recorded the greatest drop in rents, which fell 2.5 per cent month on month, among the city’s various office districts, the first time it has done so since December 2005, according to JLL. Meanwhile, the district’s vacancy rate continues to increase. Surrendered space, or office space that tenants give up before their leases expire, amounted to about 520,000 sq ft, or 2.2 per cent, of Grade A office stock, breaching the 500,000 sq ft mark for the first time since October 2002, JLL said.