More than a quarter of Hong Kong companies want to reduce their office footprint this year amid macro uncertainties, but those in the insurance and legal services sectors are bucking the trend, according to a new survey by Colliers.
Of the 358 Hong Kong companies surveyed by the property consultancy, 27 per cent said they intended to downsize their office space, an increase of 6 percentage points from last year. Around 91 per cent said price is the top factor when making 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. “In general, they are seeking ways to streamline their operating costs, including re-evaluating their office rentals and use of office space.”
Some 67 per cent of the respondents cited cost as a reason for cutting office space, while 60 per cent were concerned about shrinking business demand, Colliers found.
The logistics and shipping sector had the highest share of respondents cutting their office space because of a weak outlook, followed by the technology, media and telecommunications industry, according to the report.
The high vacancy rate has led to a decline in rents, according to Ivan Wong, senior director at Colliers. “We see double-digit-level vacancy rates in major districts in Hong Kong, where the landlords have to offer special packages for companies.”
A recent report by property consultancy CBRE found that last year half of the Asian markets recorded rental levels below pre-pandemic levels, including Hong Kong and first-tier cities in mainland China.
A weaker-than-expected economic recovery and uncertainties over the US presidential election have had more people “talking about money”, said Ngan at a meeting with reporters last week.
Despite the downsizing trend, some companies are still looking to add space. Half of the insurers and a third of the law firms surveyed by Colliers wanted a bigger office in the next 12 months.
Ngan said demand for insurance services contracted during the Covid-19 pandemic, but now that business is returning, insurance companies are expanding, with many choosing Tsim Sha Tsui and nearby areas as their first choice.
Hong Kong’s AIA Group earlier this year leased four floors totalling 150,000 square feet in the Airside tower at Kai Tak, the largest deal in the East Kowloon area this year, according to property developer Nan Fung.
While renters continue to be sensitive to prices, over 80 per cent of respondents to the Colliers survey remained loyal to central business districts, including Central, Admiralty, Kowloon West and Kowloon East.
However, with rents becoming a top concern, environmental, social and governance has been relegated to the least considered factor, the consultancy said.
