Hong Kong’s ageing office towers likely to lose rental value of US$1.3 billion without upgrades amid changing market dynamics

More than half of the city’s grade A and B buildings are considered ageing as they were built more than 20 years ago, with rents 10 to 40 per cent lower than well-maintained and newer buildings

Upgrades to improve air quality, natural light and access to outdoor space, proptech solutions to support de-densification and social distancing must be priority in office buildings, JLL says

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Office vacancy rates in Central rose to a 15-year high of 7.6 per cent in the first quarter, according to Savills. Photo: EPA

Published: 10:00am, 5 May 2021Updated: 9:54pm, 5 May 2021

At least 100 “ageing” office buildings in Hong Kong need to be refurbished to unlock their rental potential, as the Covid-19 pandemic changes market dynamics and tenant expectations, according to JLL.

More than half of the city’s grade A and B buildings are considered ageing as they were built more than 20 years ago, with rents 10 to 40 per cent lower than well-maintained and newer buildings, the property consultancy said.

And with less than a quarter of them upgraded in the last 10 years, they could lose rental value worth over HK$10 billion (US$1.3 billion) without enhancements, it added.

“Many existing buildings no longer yield the same value as before the pandemic,” said Andrew Macpherson, head of asset development at JLL Asia Pacific. “The situation will be made worse when new buildings that have been designed to meet post-pandemic value drivers of health, wellness and sustainability, human experience and technology enter the market over the next two to three years.”

Hysan Development, the owner of Lee Garden Three in Causeway Bay, has benefited from higher rental yields after the redevelopment of the office tower. Photo: Edmond So

Upgrades such as wellness facilities, improved air quality, natural light and access to outdoor space, proptech solutions to support de-densification and social distancing must be among the priority renovation works in office buildings, JLL said.

Landlords are looking to rectify the situation and improve rental yields, undertaking major refurbishments on many of their properties. The Hong Kong Club building in Central, which was completed in 1984, is undergoing a renovation including a facade replacement. The China Everbright Centre in Wan Chai, completed in 1991, is also undergoing enhancements.

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