Hong Kong Grade A office vacancy reaches a record 11.3m sq ft in August

Nearly 10% of all Grade A office occupiers downsized in the last three years.

Most companies have been downsizing since mid-2019, causing Hong Kong’s Grade A office market to reach record levels of vacancy and triggering the longest and deepest downturn as a result, according to CBRE.

A recent report published by CBRE reveals that the office space occupied by various sectors has declined between March 2019 and March 2022. The city-wide occupied space in the Grade A office market fell by 2.3 million sq. ft. to 73.0 million sq. ft. during this period. By square footage, logistics & trading, professional services (ex-legal) and banking and finance recorded the biggest net contraction in total occupied space. By percentage, the logistics & trading and professional services (ex-legal) sectors also had the biggest footprint reduction, down 11.8% and 14.4%, respectively. The banking & finance sector trimmed its total footprint by just 2.8%.

Here’s more from CBRE:

The report shows that a total of 948 companies (or 9.5% of all Grade A office occupiers) downsized their Grade A office space in the three years to March 2022. This has pushed the vacancy to escalate and set a new record high of 9.6 million sq. ft in March 2022 and further reached 11.3 million sq. ft. in August 2022

Falling effective rents, increased space availability in the city core and high relocation costs have lessened the appeal of decentralisation for businesses. Office decentralisation has slowed with 974,800 sq. ft. of space relocated from core submarkets.

“The economic recession has prompted businesses to look at the office costs more carefully and reduce office footprint over the past few years. We have seen declines in overall new and expansionary demands, but positive signs from legal, real estate, healthcare industries and government departments. These industries are less affected by economic downturn and have been the key counter cyclical growth drivers for the past three years. Moving forward, some of these industries will continue to see faster business growth, driven by structural changes in the economy. Office decentralisation will also regain momentum as more high-quality office spaces are available in decentralised areas,” said Marcos Chan, Executive Director and Head of Research, CBRE Hong Kong.