The Hong Kong government’s 12-month halt on the sale of commercial land will have limited effect in easing the supply glut in the city’s offices, as the moratorium does too little too late to slow the biggest onslaught of newly completed space in 17 years, according to several consultants.
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“Taking into account the high vacancy rate of office buildings in recent years and the sufficient supply in the next few years, the budget proposes not to put commercial land for sale next year to allow the market room to absorb the existing supply,” Financial Secretary Paul Chan Mo-po said today. He added that the government may designate some commercial sites for other uses, and provide more flexibility in how the land will be used.
That would not do much, because the current oversupply – expected to reach 3 million square feet (278,710 square metres) in the coming months – would take between seven and 10 years to fully digest, said Hannah Jeong, head of valuation and advisory services at CBRE Hong Kong.
“Boosting the demand [for commercial space] is also important, including government support to attract more enterprises” to invest and open offices in Hong Kong, she said.
Hong Kong’s commercial occupancy data paints a grim picture: the vacancy rate in grade A offices crept up to 13.3 per cent in January, from 13.2 per cent in December, according to JLL. Correspondingly, the rental charges have fallen by 0.2 per cent in January, with the full-year decline expected at between 5 per cent and 10 per cent, the consultant said,
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Rents may decline further to the level last seen in 2012, which improves the price competitiveness of one of the world’s costliest cities. Still, a drastic fall in rental income could erode the value of commercial properties owned by the city’s biggest landlords and force weaker owners to sell their assets at deep discounts, according to S&P Global Ratings.