Hong Kong's prime office rents fall by most in a decade as protests chill market, Chinese companies retreat

By Cheryl Arcibalcheryl.arcibal@scmp.com / https://www.scmp.com/business/companies/article/3038855/hong-kongs-prime-office-rents-fall-most-decade-protests-chill?utm_medium=partner&utm_campaign=contentexchange&utm_source=EdgeProp | November 26, 2019 11:57 AM SGT
More than five months of social unrest in Hong Kong is starting to hurt prime office landlords with rent falling by the most in a decade as multinationals downsized and mainland Chinese firms retreated from the city.
Overall rents in Grade A offices fell 1.6 per cent to HK$74.30 (US$9.50) per square foot in October from a month earlier, according to property consultants JLL, the biggest monthly decline since August 2009. Among five major business districts in the city, the slide was most pronounced in Central where rents fell by 2.3 per cent to HK$122.10 per square foot last month.
The slump offers yet another snapshot of Hong Kong's economic recession brought on by escalating violence among anti-government radicals in recent weeks, adding to official data showing declines in retail sales, tourist arrivals and exports. Co-working space operator WeWork is trimming its presence and headcount, while State Street Asia is giving up some of its space in the city.
"Lots of companies are exploring ways of downsizing to save cost in the past two months," said Wendy Lau, senior director of Hong Kong office services at Knight Frank. "The leasing market had almost come to a standstill in the past couple of weeks."
An additional 188,500 square feet of prime office space in the city became vacant in October, causing a third straight month of rising vacancy, according to JLL. The office market has been wobbling since the outbreak of street protests in June as vandals targeted Chinese bank branches and retail outlets suspected to be linked to mainland business groups. That is chilling the interest from mainland Chinese companies, who have fuelled the local market in recent years by outpricing rivals for some of Hong Kong's prestigious offices.
"Clients are in no mood to talk about office leases," Lau said. "We had several meetings that got cancelled as protesters clashed with police this week."
Demonstrators raise their hands as they take to the streets during a protest at the Central District in Hong Kong on November 15, 2019. Photo: Reuters alt=Demonstrators raise their hands as they take to the streets during a protest at the Central District in Hong Kong on November 15, 2019. Photo: Reuters