Office rents have dropped in Hong Kong as the pandemic takes its toll, but demand is likely to remain strong over the longer term
Hong Kong’s office rents have long had the unenviable reputation of being among the most expensive in the world and over the past few years they have overtaken even Tokyo, so long a by-word for skyhigh corporate overheads.
No longer. A series of unfortunate events has contrived to de-throne Hong Kong and set Tokyo back at the head of regional markets. First we saw the emergence of the U.S.-China trade war in late 2018, followed by national security legislation and a period of widespread social disruption in 2019, and finally Covid-19 in early 2020. The combined impact of the three (arguably unresolved) factors set local rents on a downward trajectory from Q1 2019.
It is worth noting, however, that if we just look at rental costs in our most prime office buildings and compare them with other cities across Asia Pacific, Hong Kong even now has no peer in the region.
So where is the local office market today after being ravaged by three years of disruption? Vacancy has certainly risen sharply. PRC firms found operating conditions problematic during the unrest, even before Covid shuttered borders. Meanwhile MNCs and local businesses alike are facing tough operating conditions locally and globally, and corporate downsizing has been the norm.
Co-working operators have also met a less receptive market since WeWork failed to list in the United States and Covid rendered shared offices less appealing. So despite an extremely limited number of new office completions over 2020 and 2021, subdued demand has meant that vacancy has ballooned to over 5.5 million sq ft (roughly four years of average annual take-up). With much higher levels of new supply expected in 2022 and 2023, this figure can be expected to rise further.
As vacancies rise, landlords must compete more aggressively to fill space and rents must inevitably fall, which is exactly what has happened. Office rents are around 20% below the peak levels of early 2019 and could slip further. When looking ahead we face the obvious uncertainty of how long entry at borders will remain restricted and how long social distancing will remain in place.
Mainland businesses are likely to become a major driver of office demand over the next few years and this could rapidly be unlocked by easier travel to the SAR. Another demand driver will be the IPO market, which could well post a record year this year, driving demand for financial, professional and business services.
Prime Office Rents 甲級寫字樓租金
| Indicators 指標 | 2018 | 2019 | 2020 |
| Hang Seng Index 恆生指數 | 25,845.70 @ Dec 31 2018 2018年12月31日 | 28,189.75 @ Dec 31 2019 2019年12月31日 | 27,231.13 @ Dec 31 2020 2020年12月31日 |
| Retail Sales Value (HK$ million) 零售銷售值 （百萬港元） | 485,156 @ Jan to Dec 1月至12月 | 431,222 @ Jan to Dec 1月至12月 | 326,451 @ Jan to Dec 1月至12月 |
| Total number of overnight visitor arrivals 訪港過夜旅客總人次 | 29,262,701 @ Jan to Dec 1月至12月 | 23,752,359 @ Jan to Dec 1月至12月 | 1,359,365 @ Jan to Dec 1月至12月 |
| RevPAR of overall hotel market 整體酒店市場平均客房收益 (HK$ per night港元，每晚) | 1,483 @ Dec 2018 2018年12月 | 642 @ Dec 2019 2019年12月 | 527 @ Dec 2020 2020年12月 |
| Unemployment rate 失業率 | 2.80% @ Dec 2018 2018年12月 | 3.30% @ Dec 2019 2019年12月 | 6.60% @ Dec 2020 2020年12月 |
| Movements of Grade A office rents 甲級寫字樓租金變動 | -6.71% | -0.10% | -16.60% |
Potentially, tech businesses could also extend their reach from elsewhere in the Greater Bay Area (GBA) into Hong Kong.
How far rents decline and the timing of the recovery phase will not just be down to such demand drivers, however, but will in part be due to the success of vaccination programmes and the impact of Covid variants on local markets, factors that are impossible to predict.
Given its growing importance, it is worth taking a closer look at demand from Mainland companies. At the start of 2020, around 60% of companies listed in Hong Kong were Mainland (70% by market cap) with a rising dominance in media, insurance and real estate. Of the Hang Seng’s 50 listed companies, Tencent is the largest, representing over 10% by market weighting. If we look to media, 35% of traditional media outlets have major PRC stakes including TVB and the SCMP, while of the territory’s largest insurers, three are from the PRC and account for 40% of the market.
Traditionally, Mainland office demand has been driven by finance firms and asset managers, and such firms have sought out landmark buildings in core locations, mostly Central. They have been happy to pay higher rents for the “right address” – often a prime office with a dedicated drop off and harbour views. Already in 2021, we estimate that over 25% of Grade-A office space in Central is occupied by PRC firms, but this profile may now be broadening as a wider variety of Mainland companies look to take space in a more diverse range of business districts and buildings beyond the core CBD cluster. Looking ahead, it is also hard to avoid the disruptive nature of new technology. Much was already discernable before Covid took over our lives, if you cared to look closely enough. Some executives were already selectively working from home, offices were being given a new sense of amenity and hot-desking was becoming more widely accepted. Some were even experimenting with new communications apps. There is a wellworn cliche in real estate that “form follows function” and with technology rapidly changing the way we work, accelerated by a pervasive virus, form has had to follow.
Work from home (WFH) has become a mandated way of working in many countries and – given roomier residential accommodation and lengthy, expensive and sometimes unreliable commutes – may well become an established practice, at least for a few days a week for office workers.
In Hong Kong, however, I am not quite so sure that we will see comparable levels of adoption, as transport infrastructure is modern, efficient and reasonably priced while housing is notoriously cramped. With a greater availability of offices over the next few years at more competitive rents, employers may find that they can afford lower worker densities and more genuine amenity, luring many of us back to mingle once again with colleagues.
香港寫字樓租金受疫情影響有所下跌，惟長遠需求將維持強勁
香港的寫字樓租金高企，一直高踞世界前列，過去數年更超越東京，成為高昂經營開支的代名詞。 然而情況有所變化。接二連三的事故導致香港失落第一的寶座，東京重登區內市場榜首。首先是在2018年底展 開的美中貿易戰，隨後是2019年的國 家安全立法和持續廣泛的社會動盪，而2020年初更爆發新冠病毒疫情。受到這三大不明朗因素的影響，本地租金自2019年第一季開始下行。
不過值得留意的是，單論香港甲級商廈的租金，目前仍遙遙領先亞太區其他城市。
面對連續三年的干擾，本地寫字樓市場現況如何？答案是空置率急升。在邊境因疫情而關閉前，社會動盪已令中國企業經營困難。與此同時，跨國企業和本地公司同樣面臨嚴峻的內外 經營環境，而企業縮減規模已成常態。
此外，自WeWork在美國上市失敗，加上疫情令共享辦公室的吸引力減少，市場對共享工作空間的反應不復從前。因此，儘管2020至2021年的寫字樓落成量甚低，惟需求疲弱令空置面積激增至超過550萬平方呎（約為四年 的平均吸納量）。預期2022和2023年將有大量新增供應，空置量或進一步上升。
面對空置率上升，業主要在競爭日熾的市場中爭取租戶，租金無可避免會下調。寫字樓租金已較2019年初的高 位回落約兩成，下行趨勢或會持續。展望未來，封關和社交距離措施將維持多久，顯然為前景增添不確定性。
內地企業或會成為未來幾年帶動寫字 樓需求的主要動力，邊境放寬後可望 發揮巨大潛力。首次公開招股市場也將推動需求，今年的集資額可能再創新高，帶動市場對金融、專業和商業服務的需求。此外，其他大灣區城市的科技企業或會來港拓展業務。
不過，租金跌幅和回升不僅取決於需求，還要視乎疫苗接種計劃的成果和 疫情發展對本地市場的影響，而這些因素無法預測。
鑒於內地企業的重要性與日俱增，他 們對寫字樓空間的需求亦值得深入探 討。2020年初，在香港上市的公司中 約有六成為內地企業（市場上限為七成），在媒體、保險和房地產業取得主導地位。在恆指50大成分股中，以騰訊的規模最大，佔市場比重超過一成。媒體方面，35%傳統媒體由中資股東持有多數股權，包括無綫電視和南華早報，而本港有三家大型保險公司來自中國內地，共佔四成市場份額。
傳統而言，內地對寫字樓的需求來自 金融機構和資產管理公司，目標為核 心地段的地標建築，當中大部分位於中環。這些公司願意為「合適地點」 繳付較高的租金，通常是附設專用上落客區和享有海景的甲級寫字樓。截至2021年，我們估計中環有超過四分一的甲級寫字樓空間由內地企業佔用，而這個範圍正在擴大——各類內 地公司希望落戶核心商業區以外的不 同商業區和大廈。
展望未來，我們難以避免新科技造成的顛覆性變革。只要細心留意便會發現，工作環境在疫情爆發前已出現變化。一些管理層開始部分時間在家工作，辦公室設施有所改變，流動共用辦公桌逐漸獲廣泛採用，更有企業嘗試轉用新的通訊程式。「形式追隨功能」是地產業的老生常談，科技迅速改變我們的工作模式，加上疫情加快 轉型步伐，形式不得不隨之轉變。
許多國家強制僱員在家工作，而由於家居環境較寬敞，通勤耗時又耗費， 而且未必可靠，這個安排很可能成為常態，即白領上班族每周最少幾天在家辦公。 不過，在家工作於香港未必會同樣普及，因為本地交通便捷、價格合理，居住環境卻狹小擠迫。未來幾年市場將推出更多價格較相宜的寫字樓，僱主或有能力承擔較低密度的辦公空間，提供舒適愜意的工作環境，吸引員工重返辦公室上班。
【Source: The Bulletin HKGCC , June, 2021】
【2021年6月，文章來源： 香港總商會工商月刊 】