Hong Kong’s economy is finally turning the corner. But it could be years before the city’s once-lucrative office-rental market is back to full health.
Companies are scaling back to cut costs and to adapt to an era of flexible working. That has added strain to a market already roiled by the economic impacts of social unrest, U.S.-China tensions and the pandemic. And a series of new skyscrapers will open for business next year and in 2023, putting further downward pressure on prices.
“It’s survival of the fittest,” said Fiona Ngan, head of office services for Hong Kong at Colliers International , adding that newer and better-managed properties had the advantage.
Ms. Ngan forecasts that rents for prime offices in Hong Kong’s downtown Central district will fall about 8% this year. Likewise, other property brokers surveyed by The Wall Street Journal expect falls of between 5% and 10% for high-end rents in Central.
Already, rents have fallen steeply. In February, premium Central office rents went for the equivalent of about $12.70 a square foot a month, according to the most recent available government statistics, down 27% from the June 2019 peak. Rents fell about 10% in 2020.