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Tycoons continue building Hong Kong offices as vacancies hit record

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HONG KONG (BLOOMBERG) – The world’s most expensive office market has more empty floorspace than ever. Vacant office stock in Hong Kong climbed to a record high in December to 9.1 million square feet (sq ft) – equivalent to nearly 158 football fields, according to real estate services provider CBRE.

In Central, the city’s prized financial centre, the supply is set to increase further. Li Ka-shing and Lee Shau Kee, Hong Kong’s richest property tycoons, are building new office blocks that are slated to open next year.

It’s not clear how quickly vacancies will fill up as the border with the mainland remains shut, preventing Chinese companies from supporting Hong Kong’s office market, while demand from global banks wanes as the pandemic reshapes work styles.

The oversupply in Hong Kong underscores an unprecedented challenge to property developers in the global financial hub, already grappling with an expat exodus and some of the world’s harshest border controls to curb the virus.

Landlords are becoming more willing to accommodate tenants’ needs, for example with rent-free periods and lease terms that depart from the usual 3 years, said Ada Fung, an executive director for office services at CBRE Hong Kong. In Kowloon, some are even paying for the fit-out cost for their tenants, she said.

The towers under construction are the first new office buildings in Central, an area packed with skyscrapers housing financial behemoths from Goldman Sachs to JPMorgan Chase & Co, in almost 2 decades.

Lee’s Henderson Land Development is building a glass tower shaped like a flower designed by Zaha Hadid Architects. Just across the road, Li’s CK Asset Holdings is redeveloping the stolid 1970s-era Hutchison House into a brand new skyscraper. Both of the state-of-the-art buildings are set to open next year.

The last time leading local developers completed an office building in the prime real estate district was the tower serving insurer AIA Group in 2005.

Plans to start development of the towers had already begun before the pandemic’s onset reshaped demand for office blocks. So far, information on who will lease space has been largely undisclosed.

Henderson Land has announced 1 tenancy for the new tower. Auction house Christie’s will occupy 4 floors in the 36-storey building. CK Asset hasn’t released any information about the pre-leasing progress for the 41-storey Cheung Kong Center Two.

CK Asset and Henderson Land didn’t respond to questions about the new buildings’ leasing.

Oversupply of workspace is even more pronounced in other business districts in Hong Kong. Kowloon East will see 4 office towers spanning more than 2 million sq ft complete in 2022. Across the Victoria Harbour, Swire Properties is finishing its Two Taikoo Place with 1 million sq ft of floor area this year.

There will be a new supply of 4 million sq ft in 2022 across the territory, only 3 per cent of which has been pre-committed, according to Savills in December.

Given the sustained increase in supply in the next couple of years, “it will take quite some time to absorb the vacant space”, Fung said.

Mainland Chinese companies lease about 30 per cent of Central’s Grade A office buildings, up from less than 5 per cent in 2008, according to Savills. However, with borders still shut with the mainland, executives can’t come over to the city to inspect office space in Hong Kong. Even when they do, it’s unlikely that they will splurge on large amounts of workspace like they used to.


HONG KONG (BLOOMBERG) – The world’s most expensive office market has more empty floorspace than ever. Vacant office stock in Hong Kong climbed to a record high in December to 9.1 million square feet (sq ft) – equivalent to nearly 158 football fields, according to real estate services provider CBRE.

In Central, the city’s prized financial centre, the supply is set to increase further. Li Ka-shing and Lee Shau Kee, Hong Kong’s richest property tycoons, are building new office blocks that are slated to open next year.

It’s not clear how quickly vacancies will fill up as the border with the mainland remains shut, preventing Chinese companies from supporting Hong Kong’s office market, while demand from global banks wanes as the pandemic reshapes work styles.

The oversupply in Hong Kong underscores an unprecedented challenge to property developers in the global financial hub, already grappling with an expat exodus and some of the world’s harshest border controls to curb the virus.

Landlords are becoming more willing to accommodate tenants’ needs, for example with rent-free periods and lease terms that depart from the usual 3 years, said Ada Fung, an executive director for office services at CBRE Hong Kong. In Kowloon, some are even paying for the fit-out cost for their tenants, she said.

The towers under construction are the first new office buildings in Central, an area packed with skyscrapers housing financial behemoths from Goldman Sachs to JPMorgan Chase & Co, in almost 2 decades.

Lee’s Henderson Land Development is building a glass tower shaped like a flower designed by Zaha Hadid Architects. Just across the road, Li’s CK Asset Holdings is redeveloping the stolid 1970s-era Hutchison House into a brand new skyscraper. Both of the state-of-the-art buildings are set to open next year.

The last time leading local developers completed an office building in the prime real estate district was the tower serving insurer AIA Group in 2005.

Plans to start development of the towers had already begun before the pandemic’s onset reshaped demand for office blocks. So far, information on who will lease space has been largely undisclosed.

Henderson Land has announced 1 tenancy for the new tower. Auction house Christie’s will occupy 4 floors in the 36-storey building. CK Asset hasn’t released any information about the pre-leasing progress for the 41-storey Cheung Kong Center Two.

CK Asset and Henderson Land didn’t respond to questions about the new buildings’ leasing.

Oversupply of workspace is even more pronounced in other business districts in Hong Kong. Kowloon East will see 4 office towers spanning more than 2 million sq ft complete in 2022. Across the Victoria Harbour, Swire Properties is finishing its Two Taikoo Place with 1 million sq ft of floor area this year.

There will be a new supply of 4 million sq ft in 2022 across the territory, only 3 per cent of which has been pre-committed, according to Savills in December.

Given the sustained increase in supply in the next couple of years, “it will take quite some time to absorb the vacant space”, Fung said.

Mainland Chinese companies lease about 30 per cent of Central’s Grade A office buildings, up from less than 5 per cent in 2008, according to Savills. However, with borders still shut with the mainland, executives can’t come over to the city to inspect office space in Hong Kong. Even when they do, it’s unlikely that they will splurge on large amounts of workspace like they used to.

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