Over a quarter of Hong Kong companies are looking to reduce their office space this year, according to a recent survey by property consultancy Colliers. Out of 358 companies surveyed, 27% indicated plans to downsize their office footprint, marking a 6 percentage point increase from the previous year. The survey also found that 91% of respondents prioritize price as the top factor in rental decisions.
“Challenging macroeconomic and geopolitical environments are causing businesses in Hong Kong to stay cautious about their business outlook,” said Fiona Ngan, head of occupier services at Colliers. She noted that companies are seeking ways to streamline operating costs, including re-evaluating office rentals and space usage. About 67% of respondents cited cost as a reason for reducing office space, while 60% were concerned about shrinking business demand.
The logistics and shipping sector had the highest proportion of respondents planning to cut office space due to a weak outlook, followed by the technology, media, and telecommunications industry. This trend has contributed to a decline in rents, with senior director Ivan Wong highlighting double-digit-level vacancy rates in major districts, prompting landlords to offer special packages to attract tenants.
A report by CBRE noted that half of the Asian markets, including Hong Kong and first-tier cities in mainland China, recorded rental levels below pre-pandemic figures last year. The combination of a weaker-than-expected economic recovery and uncertainties over the upcoming US presidential election has led to increased caution among businesses.
Despite the general trend of downsizing, some sectors are bucking the trend. Half of the insurance companies and a third of law firms surveyed by Colliers are looking to expand their office space within the next year. Ngan explained that the demand for insurance services, which contracted during the Covid-19 pandemic, is now rebounding, leading to expansion plans, particularly in areas like Tsim Sha Tsui.
Earlier this year, AIA Group leased four floors totaling 150,000 square feet in the Airside tower at Kai Tak, marking the largest deal in the East Kowloon area for 2023, according to property developer Nan Fung.
While cost remains a top concern for renters, loyalty to central business districts such as Central, Admiralty, Kowloon West, and Kowloon East persists, with over 80% of respondents favoring these locations. However, the emphasis on price has led to environmental, social, and governance considerations becoming the least prioritized factor, according to the survey.
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