According to Nikkei Asia, Hong Kong’s struggling commercial real estate market is driving away coworking space owners as businesses take advantage of the slump to negotiate better lease terms for traditional office space.
Flexible workspace provider The Great Room shuttered its main location in the Cheung Kong Centre of CK Hutchison in July. A firm representative was quoted as saying, “This decision was not taken lightly, but [was] a necessary one so that we can better redeploy our resources,” according to Nikkei Asia.
“We remain committed to Hong Kong and we look forward to continuing to grow our network of locations here,” the business said. According to reports cited by Nikkei Asia, the Australian company Servcorp, which operated two flexible workspaces in the Grade A premium office buildings IFC and One Peking, ceased operations in Hong Kong in June.
Due to shifting workplace practices and a need for shorter lease agreements, flexible working space operations grew in Hong Kong during the COVID-19 epidemic. As the COVID epidemic has stopped, workers have been urged to return to work by the housing and public transit, according to a Nikkei Asia article.
Adaptable office manager According to the article, The Executive Centre said that it has no intentions to expand its Hong Kong operations this year. As workers begin to return to their workplaces, worried businesses have been looking for facilities with upscale designs that include technology and health features.
According to real estate firm JLL, businesses are more inclined to use traditional office setups to meet their demands. “Tenants are more willing to make real estate decisions,” according to Paul Yien, executive director of office leasing advising at JLL, “as office rents are around 30% lower than the market peak in 2019 and landlords are more flexible with leasing terms.”The percentage of vacant offices is anticipated to climb further when new developments are finished, according to a Nikkei Asia article, as market confidence has strengthened and leasing requests for Grade A offices have increased. According to the CBRE, the overall amount of unoccupied space in the city reached a record high of 13.5 million square feet in the second quarter of 2023 due to negative absorption, or more space being added than is rented out. According to the news story, the lease volume for the first half of the year was only half as high as it was in 2022.
According to Ada Fung, head of consulting and transaction services for offices at CBRE Hong Kong, “Global economic uncertainties and higher financing costs ensured that office leasing momentum slowed marginally compared with the first half of 2022.” The change comes after years of market challenges for commercial real estate.
According to a Nikkei Asia article, vacant office space in Hong Kong hit a record high as international corporations withdrew due to the COVID-19 outbreak and Beijing’s security crackdown, which caused a mass outflow of citizens. Particularly in the West, financial services providers have reduced their presence.
According to the analysis, commercial real estate firm CushmanWakefield anticipates a further decline in office rental rates for the full year of 2023 of between 5% and 7%. The Hong Kong administration has been working to entice talent back to the financial hub in the meantime.