Concrete Analysis | What Hong Kong office landlords must do to retain and attract tenants amid improving outlook

Landlords and asset owners who maintain better-quality buildings perform better in terms of occupancy and rents, according to Colliers

With the rent gap between Central and other noncore areas narrowing, tenants are likely to opt for premium space on the same budget

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The occupancy rate of office buildings in Central, Hong Kong’s most sought after business district, is slowly improving. Photo: AFP

Published: 12:00pm, 9 Nov 2021Updated: 7:05pm, 9 Nov 2021

Hong Kong’s office sector recorded overall net absorption for the first time after eight consecutive quarters – a key indicator of the health of the market.

Despite the lion’s share coming from Kowloon, there was a return in demand from occupiers in Central, where the vacancy rate dropped to 7.2 per cent. As we move towards the end of the year and into 2022, we see these two key indicators continuing to improve with stronger plays for recentralisation and flight-to-quality options within the central business district (CBD).

This is a timely call to action for occupiers and landlords, especially as it’s safe to assume that in-depth strategic reviews around their real estate footprints will be ongoing and remain on the agenda in the short to medium term. The evolving needs of businesses and employees will be driving the discussion, with quality of space, sustainability, wellness, flexibility, management, right sizing and cost savings being underpinning factors.

The outlined improvement in performance and evolving needs puts the office sector in a window between rents bottoming out and recovery, especially in relation to the previous peak witnessed in the first quarter of 2019. It presents a clear strategic opportunity for occupiers to add a move to Central, or within the wider CBD.

A view of the Central financial district. Photo: Reuters

Given that we expect a rebound in office values and rent from next year, there are several trends that should be acknowledged by both occupiers and landlords, if they want to seize this window of opportunity.

.css-1m2rp1p{color:#34b8b5;}Concrete Analysis | What Hong Kong office landlords must do to retain and attract tenants amid improving outlook

Concrete Analysis | What Hong Kong office landlords must do to retain and attract tenants amid improving outlook