The amount of vacant office space in Hong Kong climbed to 524,947 square feet in the first three months of 2020, from 377,990 square feet in the previous quarter, the biggest such increase for 18 years.

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“Singapore’s office market is actually more cyclical than that of Hong Kong, because we do not have a big demand driver from the mainland Chinese corporates,” said Christine Li, Cushman’s head of research, Singapore and Southeast Asia.

The divergence in performance of the two markets is set to become more pronounced, according to most estimates.

Singapore’s office rents will remain flat this year, according to Colliers, or fall by up to 10 per cent, if Cushman & Wakefield’s forecast proves accurate.

Hong Kong’s office rents are likely to slump by as much as 20 per cent, JLL predicted, as demand from mainland Chinese companies and co-working operators falls.

The vacancy rate in Singapore dropped to 3.1 per cent from 3.4 per cent in the first quarter. It is likely to remain below the 10-year average of 6.2 per cent this year and next, according to forecasts.

“The market has not been subjected to downward rental pressures,” said Mark Lampard, head of regional talent representation at Cushman in Singapore. “[In Hong Kong] the demonstrations prior to Covid-19 had tempered demand. Accordingly the Hong Kong market has been dealing with a sustained period of low demand whereas Singapore is only recently feeling this effect.”

Better fundamentals are cushioning the Singapore office market.

“We expect the Singapore office market to be more defensive than during global financial crisis due to the lower vacancy and supply we already see now,” said Tricia Song, head of research for Singapore at Colliers, noting that the market also has more diversified demand drivers such as technology occupiers who are still doing well, and less dependent on financial occupiers which were hit worst during the financial crisis.

Hong Kong’s office sector was already under enormous strain as the city spent the second half of last year mired in the worst political crisis in its history.

In 2019, the total space leased in Hong Kong declined by 62 per cent to 1.1 million square feet, while office rents in Central, the main business district, plunged 6.3 per cent in the second-half, according to JLL.

In the first three months of 2020, for a second consecutive quarter, more occupiers vacated grade A office space in Hong Kong than took it up, giving rise to a higher vacancy rate.

The situation has historically been very different. Between 2014 and 2018, prime office rents in Hong Kong rose 41 per cent, while Singapore’s declined by 1.4 per cent, according to Cushman.

Demand for office space in Hong Kong is set to fall further as most employees work from home to contain the spread of coronavirus.

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“With this as an option, some companies will consider the viability of cutting leased space to save costs, while maintaining operations without compromising the level of productivity and service quality. We expect these considerations will further undermine leasing demand in the near future,” said Keith Hamshall, Cushman’s head of office services, Hong Kong.