Why Hong Kong no longer has the most expensive office rents in APAC

Tokyo now has the top spot again.

Savills says Hong Kong’s office rents have long had the unenviable reputation of being among the most expensive in the world and over the past few years they have overtaken even Tokyo, for so long a by-word for sky high corporate overheads. No longer.

Here's why, according to Savills:

A series of unfortunate events have contrived to de-throne Hong Kong and set Tokyo back at the head of regional markets. First we saw the emergence of the US-China trade war in late 2018, followed by national security legislation and a period of widespread social disruption in 2019, and finally COVID-19 in early 2020.

The combined impact of the three (arguably unresolved) factors set local rents on a downward trajectory from Q1/2019. It is worth noting, however, that if we just look at rental costs in our most prime office buildings and compare them with other cities across Asia-Pacific, Hong Kong even now has no pier in the region.

Challenges ahead

So where is the local office market today after being ravaged by three years of disruption? Vacancy has certainly risen sharply. PRC fi rms found operating conditions problematic during the unrest, even before COVID shuttered borders while MNCs and local businesses alike are facing tough operating conditions locally and globally and corporate downsizing has been the norm.

Coworking operators have also met a less receptive market since WeWorks failed to list in the US and COVID rendered shared offices less appealing. So despite an extremely limited number of new office completions over 2020 and 2021, subdued demand has meant that vacancy has ballooned to over 5.5 million sq ft (roughly four years of average annual takeup) and with much higher levels of new supply expected in 2022 and 2023, this figure can be expected to rise further.

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