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A night view of Guangzhou, which will see rents decline 3 per cent through the rest of 2022, according to a property consultancy forecast. Photo: Shutterstock

Hong Kong, mainland China to see office rents decline through 2022 amid Covid-19 policies, while Singapore, Seoul surge

  • Hong Kong and most mainland cities will see office rents slide in the second half of the year, according to a property consultant’s forecast
  • Seoul and Singapore top CBRE Asia-Pacific’s forecast for 22 markets, while Hong Kong, Guangzhou and Tokyo will see the largest drops

Office property markets in Hong Kong and mainland China are likely to see declining rents for the rest of the year, according to a consultancy ranking that places them in the bottom half of a list of 22 Asia-Pacific markets.

“Hong Kong SAR and mainland China are lagging in terms of rental growth,” said Ada Choi, head of occupier research and head of data intelligence and management at CBRE Asia-Pacific. “We have also revised down our full-year expectations of the two markets.”

Guangzhou, which ranks 21st on the list, is tipped to see rents tumble by 3 per cent for the rest of the year following a 1.1 per cent decline recorded in the first half of the year, according to CBRE. The vacancy rate in the city is likely to ease slightly, to 16.1 per cent from the current 16.4 per cent.

Only Tokyo fares worse, with the forecast calling for a 3.1 per cent slide in office rents, following a 1.6 per cent decline so far this year, CBRE said. The Japanese capital’s vacancy rate is likely to worsen to 3.1 per cent from 2.1 per cent.

A view of commercial buildings in Hong Kong. The city will see office rents decline by 2.5 per cent in the second half of the year. Photo: SCMP / Dickson Lee

Hong Kong, meanwhile, ranks 20th, with rents pegged to fall 2.5 per cent.

Office rents in Shanghai are forecast to retreat 0.9 per cent, while those in the tech hub of Shenzhen are estimated to see a 0.7 per cent slide.

Among Chinese cities, only the capital Beijing is expected to see office rents rise, with CBRE predicting they will improve by 0.5 per cent – placing the city in the 13th spot.

Firms flock to rent units at 3 newly built office towers near Hong Kong’s airport

Singapore’s office market is likely to be the second-best performer with 8.3 per cent rent growth this year. Seoul tops CBRE’s list with an anticipated 14.8 per cent increase in rents.

While most major markets in the region have opened to international visitors provided they are fully vaccinated, mainland China and Hong Kong still require visitors to quarantine upon arrival, on top of a plethora of Covid-19 tests.

China, the world’s second-largest economy, grew at a slower-than-expected 0.4 per cent pace last quarter, reflecting the toll of wide-ranging lockdowns in the capital Beijing and financial hub Shanghai, which hammered economic output and likely put the nation’s 5.5 per cent growth target for this year out of reach.

Glut of new prime Hong Kong office space could further depress rents

Meanwhile, Hong Kong’s economy slipped into a recession in the second quarter, contracting by 1.4 per cent from a year ago. In the first three months of the year, the gross domestic product slumped 3.9 per cent, leading officials to downgrade the growth forecast for the second time this year. Hong Kong’s economy is now tipped to contract by as much as 0.5 per cent or grow by as much as 0.5 per cent.

“The continued closure of the border between Hong Kong and China mainly affects the recovery of Hong Kong in regards to attracting mainland companies and the return of Chinese tourists,” Choi said.

The impact on the office property market is apparent in Hong Kong. According to data from JLL, the vacancy rate for prime office space in July inched up to 9.6 per cent from 9.4 per cent in June – close to the record high of 9.8 per cent recorded in September 2021.
With 2.8 million square feet of new prime space hitting the market this year, supply will reach a level not seen since 2008, when it stood at 3.5 million sq ft, according to property consultancy Cushman & Wakefield.