New economy companies such as those related to cryptocurrencies, NFTs and blockchain are creating new demand for office space in Hong Kong, according to property consultancy Savills, providing some relief to a segment that has seen vacancy rates surge in recent months as multinational companies either vacate premises or reduce their footprint as part of Covid-19 measures. “Many of these new start-ups, which have made substantial profits over the past few years, are being run by young talent and entrepreneurs,” Savills said in a new study. “This new generation favours modern and well-designed offices on the periphery of traditional business districts … with smaller floor plans and a much more contemporary feel, rather than more traditional grade A offices.” Hong Kong’s office property segment has been mired in a downturn because of a switch to hybrid working arrangements at some firms and declining demand for office space as both locals and expats leave the city for various reasons, including emigrating to the UK under the fast-track British National (Overseas) passport scheme or fleeing the city’s strict Covid-19 travel curbs. This trend has contributed to soaring vacancy rates in the city, with overall empty office spaces clocking in at 9.4 per cent of the total as of April, the same amount as March, but higher than February’s 9.1 per cent, according to JLL. The city’s existing available office stock stands at 6.2 million sq ft and new supply until 2025 is likely to reach 11 million sq ft. With historical office absorption between 1.3 million sq ft and 2.7 million sq ft from 1991 to 2019, the vacancy rate could hit 17.7 per cent by 2025, a record high under normal circumstances, according to Savills. The current historic high in terms of office vacancy rates is the 15.9 per cent recorded for Hong Kong Island in July 2003, according to Knight Frank. Some foreign banks that have reduced their office space in Hong Kong between the second half of 2020 and the first half of 2021 include Deutsche Bank, which used to occupy a 104,0000 sq ft office in ICC, and Standard Chartered, which had a 65,000 sq ft office in Standard Chartered Bank Building, according to Savills. Meanwhile, demand from mainland Chinese companies is being hampered by the border closure. Beijing’s tightened regulation of certain sectors such as tech, among others, is putting further pressure on the office property segment. Firms such as Mantra Dao, which offers services on Ethereum, Binance Smart Chain and Polygon, Satori, which operates a digital asset platform, and 8 Block Capital, which focuses on cryptocurrencies, are on the other hand emerging as new tenants on the fringes of Central, according to Savills. “Central and Sheung Wan have become target areas for [such] companies as they look to expand and set up their operational footprint,” said Richie Lau, director of office services, Colliers Hong Kong. “If a company has all the approved licences in place and is already trading, expansion is an obvious next step and we’ve seen companies like HashKey recently expanding into Three Exchange Square and taking a whole floor, with an existing presence in Cyberport.” Paul Yien, director of office leasing advisory at JLL in Hong Kong, however, said that for now the demand from these companies was in its infancy and still insignificant. “We saw a few transactions related to cryptocurrency companies, blockchain and NFTs,” he said. “It has yet to become a new trend in the office leasing market.”