HONG KONG — Hong Kong’s once high-flying commercial property market faces a prolonged downturn, with analysts warning that recovery may be “improbable within the next decade” as a “negative spiral” grips the sector and landlords struggle to adjust to new realities.
The warning comes in the second instalment of a two-part analysis on the city’s property market, which has been hit by weak demand, global economic uncertainty, and a shift in corporate space needs. While the first part of the series explored how a revival in Hong Kong’s stock market could help absorb some office supply, the latest assessment paints a bleaker long-term outlook.
In contrast to past downturns, such as during the 2003 SARS outbreak, landlords have so far resisted steep rent cuts, despite record-high vacancies in prime office districts. Back then, Swiss bank UBS secured a 10-year lease for 146,000 sq ft in Two International Finance Centre — then Hong Kong’s tallest building — at less than HK$20 (US$2.55) per square foot. A decade later, UBS had to pay five times that amount to renew, amid a booming market and strong economy.
Today, the environment has flipped. Analysts say that without significant rental adjustments and structural shifts in demand, Hong Kong’s office market could remain stuck in a deep freeze for years to come.
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