Desperate Hong Kong office landlords may ditch fixed monthly rent for ‘membership’ schemes to lure tenants as Covid-19 changes work habits, says JLL

As landlords compete for fewer tenants wanting less space they may have to embrace a revolutionary new leasing concept, offering different levels of ‘membership’ according to a tenant’s exact needs

It would mean office landlords becoming more like co-working space providers as they move away from the traditional fixed rent regime

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Office buildings in the financial district of Central, Hong Kong. Photo: Dickson Lee

Published: 7:30am, 25 Nov 2020Updated: 8:15am, 25 Nov 2020

Hong Kong’s office rental market is likely to undergo a radical change, with some landlords switching to a “tiered membership” model similar to that used by co-working space providers, according to property services giant JLL.

As the Covid-19 pandemic continues to wreak havoc in the world’s most expensive commercial property market, landlords are coming under increasing pressure to compete for corporate tenants, many of whom are adopting more flexible working arrangements and drastically cutting costs.

In order to lure them, the landlords may have to embrace a revolutionary new leasing concept in which they offer tenants different levels of “membership” in the office premises according to what services they use. The idea has not been tried yet in Hong Kong, but is in use in cities such as Sydney and London.

“As a user in an [office building], I want to have a car parking space, I want a gym membership, a club membership and a place for fine dining. I have to sign five contracts if I also want to have a flexible office space as well,” said Gavin Morgan, chief operating officer in Greater China and managing director in Hong Kong at JLL.

Traditionally, corporate occupiers are expected to pay a fixed cost, based on the amount of space rented and the length of the leasing terms.

A monthly membership fee – a similar pricing regime to that commonly used by flexible work space providers – can be charged according to what services the tenant uses. For instance, a big company might opt for 100 “diamond” membership cards, giving those staff members access to flexible office and meeting room spaces, use of car parks, gym and restaurants. Gold membership may offer all of those services minus the car parking, and silver could exclude access to the car park and the gym, Morgan said.

“With more corporates in the mainland and Hong Kong adopting flexible working arrangements, tenants are looking for more cost-efficient and productive ways to utilise space,” said Morgan.

Having a more flexible leasing model may help landlords increase their cash flow and meet the evolving demands of occupiers in a “new normal”, he said.