The office real estate market in 2022 and 2023 appears to be in a state of flux, with several changes and challenges facing the industry. One of the key issues is the low level of pre-commitment of completed office space, only 19% of the 3.8 million sq ft net of Grade A office completions in 2022 have been pre-committed.
3.1 million square feet of vacant office space is expected to be added to the market in 2023, on top of the 1.9 million square feet of scheduled completions. This influx of supply is expected to push vacancy rates up, if the annual average of 1.3 million sq ft from 2011 to 2019 is considered, the total volume of vacant space may reach 9.78 million sq ft at the end of 2023, resulting in a vacancy rate of 14.2%.
There is also the issue of delays to the construction of new office buildings, with some projects delayed by six to nine months due to COVID-related impacts on supply chains and construction schedules, dragging on the impact Hong Kong’s office market will face in the coming year.
The Future of Hong Kong's Office Market
Not all is lost, however, as many upcoming office buildings are equipped with innovative and green features catering to the future needs of corporates.
In terms of demand, there are some bright spots, particularly in the financial sector, which has shown a degree of resilience in the face of wider economic uncertainty. Multifloored pre-lettings of newly completed or soon-to-be-completed Grade-A offices have been particularly popular in both the CBD and decentralised areas. The recent stock market resilience also helped sustain financial-related office demand, with some firms already framing expansion plans.
In conclusion, the office market in Hong Kong has been impacted by the pandemic, leading to a delay in the construction of new office supplies. However, the market is expected to recover in the coming years, with upcoming office buildings catering to the future needs of corporates.