Office landlords in one of the world’s priciest real estate markets are seeing companies scale back their leased spaces as working from home becomes the new normal, adding to property owners’ existing woes wrought by social unrest, U.S.-China tensions, and the financial injury of 2020’s economic shutdown.
Hong Kong denizens letting portions of leases lapse include international banks BNP Paribas, DBS Group Holdings, Société Générale, and Standard Chartered, according to the Wall Street Journal.
“It could be years” before the city’s office space market returns to its pre-pandemic norms, the WSJ noted.
Rents in Hong Kong’s central district will fall 5 to 10 percent this year, according to property brokers the WSJ contacted.
After falling 10 percent in 2020, rents in February for premium space had slid 27 percent from their June 2019 peaks to the equivalent of $12.70 per square foot per month now, according to city statistics.
Plunging rents have dragged down property values by as much as 34 percent for Hong Kong’s prime office towers, real estate data firm CBRE Group found.
The city’s office market mirrors that of New York City, where Manhattan’s prime office rents slipped 8.6 percent in 2020 to $90.42 annually per square foot and then dipped more in the first quarter of this year to $87.68, data firm Savills said.
TRENDPOST: We note this article as continuing evidence that supports our forecast for a commercial real estate bust. This is just the beginning of the downturn.
Again, with business travel being cut back, more people working at home, and less commuting – plus the COVID War that has destroyed hundreds of millions of lives and livelihoods – the current trend line for the commercial sector is straight down.