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Office market is in deep trouble


Damon Ho

1st April 2023

Since February, it passed two months after the border reopening, and the overall property markets started to improve. Primary housing and the shop markets have been gradually recovering. Secondary residential property price has risen to 4% for two consecutive months. The investors are also looking for investment opportunities in shop market. Unlike the shop market, the office market does not show any improvement. The rent remains soft. In addition, Cheung Kai Center, the prime office building in Hunghom, had just been taken over by creditors. With this incident, the office market will not recover in near future.

Three years ago, Cheung Kong sold 75% shares of The Central for about forty billion HK dollars. Since then, office's transaction price, and the rent have been adjusting. Recently, Cheung kei Centre is taken over by creditor and this will have a negative effect to the office market. This biggest foreclosure in recent years will alert the office investors.

Owing epidemic shutdown, working from home has gradually become popular. Therefore, demands for office premises are decreasing year by year. Consequently, the border reopening will not have any effect to this market. Moreover, the incident of takeover of Cheung Kei Center will further push down this market in longer period.

Given the slowdown of the global economy in recent years, multinational corporations have been continuously reducing the office space in Hong Kong. Therefore, the vacancy rate of Grade A and B offices have risen to about 15%. The transaction price and the rent have been falling over twenty-five percent in the past three years. In the consequence, the vacancy rate still has upward pressure.

Like a smart investor, he already has avoided to engage in this sector long time ago. Regarding buyers who insisted involving in this market two or three years ago, they are likely to suffer high vacancy rate of these premises. However, Portion of these premises have even foreclosed by the creditors.

The first quarter of this year is ending, equity markets remain in a downturn. American Banks and Switzerland financial institutions have been taken over one after another, and many listed companies in China are defaulting on their debts. There are fewer and fewer vehicles or sectors that are worth to invest, and the situation in Hong Kong is the same.

Since the border reopening, small and medium-sized residential properties market have recovered at fastest speed. Prices and volume risen; the investors have been attracted to return to the market. The recovery of the retail sales has benefited to the shops market, but the office market has yet to show signs of recovery. Owners of such properties will still have to struggle for at least one to two years.

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1. Hang Seng opens centre in GBA 2023-04-01 12:46:50

Hang Seng Bank (China) has launched its first cross-boundary wealth management centre.

Hang Seng China opened the centre on 30 March in the Greater Bay Area (GBA) city of Guangzhou.

The bank said to provide for the rising demand for the service, a team of professionals will manage Hang Seng GBA and will establish cross-boundary wealth management centres in Hong Kong and the mainland.

Rannie Lee, head of Wealth and personal banking at Hang Seng said the bank is already well-versed in wealth management and cross-border financial services.

2. 澳門賭收大反彈 2023-04-01 16:47:45
3. HK residential market hop on the recovery track 2023-04-03 08:56:57

Real estate expert, Knight Frank, believes that Hong Kong' s residential market will hop on the recovery track moving forward.

In a report, Knight Frank said the border reopening, slowing interest rate hikes and the revival of the local economy will support the market’s recovery.

“Overall residential transaction volume is expected to gradually pick up with a sharp rebound in buyers’ confidence, but a full recovery is expected to take time,” Knight Franks said.

In February, the city recorded  4,282 residential transactions, which is 40.3% higher than the January record.


Hong Kong ranked amongst the top 10 cities with the most transactions involving ultra-prime residential, or properties worth US$25m, Knight Frank reported. 

The list was led by London and New York, each with 43 ultra-prime sales, followed Los Angeles (39), Hong Kong (28), and Miami (23).

Also amongst the top are Singapore (18), Palm Beach & Broward (18), Geneva (16), Sydney (7), and Paris (6).

5. Coworks spaces' demands went up 2023-04-04 11:44:07

Amidst border reopening, leasing demand for Grade A office market in Hong Kong has stronger activities in February but transactions has yet to grow.

In a statement,Knight Frank said there is increasing demand for small and medium-sized space for the co-working sector that boosts expansion of co-working operations.

Leasing demand from Chinese mainland firms especially after the borders reopened, Knight Frank said.

In Kowloon, leasing sentiment also improved with volume of new letting transactions in February doubled month-on-month.

6. Valuation rise as market reviving 2023-04-04 23:58:57

Banks are increasing their valuations of apartments at a number of housing estates, with the biggest month-on-month rise coming in at 7 percent, thanks to improved market sentiment after the border reopening.

Of the 20 housing estates tracked, as many as 16 of them recorded increases in valuations by banks over a month ago, with the rises ranging from 0.5 to 6.96 percent.

Valuations for flats in the other four estates remained flat.

A higher-floor four-bedroom unit at Kornhill in Quarry Bay, with an area of 595 square feet, was the best performer.

7. Property sales rocket 43.8% 2023-04-06 11:14:35

The Hong Kong Land Registry recorded a 43.8% growth in the sale and purchase agreements for the city's building units to 8,599 in March from 5,980 in February.

The total consideration for these agreements rose by 57.2% to $68.9b from $43.8b.

8. UK house price fell sharpest 2023-04-08 13:34:03

House prices in the United Kingdom fell at the sharpest annual pace since 2009 after surging interest rates increased the cost of borrowing, one of the biggest mortgage lenders said.

The average cost of a home fell 3.1 percent from a year ago in March, steeper than the 2.2 percent drop expected by economists, Nationwide Building Society said.

Prices have fallen 4.6 percent from their peak in August, bringing the average value to 257,122 (HK$2.49 million).

The figures add to evidence that the Bank of England's rate increases are slowing a market that stayed buoyant through the recession that accompanied the pandemic. The central bank raised its key rate to 4.25 percent in a series of steps from near zero in late 2021 to control inflation.