Lower valuation is next ‘pain point’ for Hong Kong office landlords, S&P says

Prime office rents could slide by as much as 10 per cent this year, the rating company said in a report released on Thursday, doubling its previous forecast for a 5 per cent drop. Fresh supply of office space from newly completed projects would intensify pressure on asset owners in a tenant’s market, it added.

“Hong Kong landlords are contending with economic uncertainty and rising competition from new builds,” credit analyst Oscar Chung said in the report. “We expect they will employ more tactics to retain tenants, including deeper cuts in rent rates for renewals.”

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Prime office rents have slumped 62 per cent from a peak in October 2018, according to government data, as social unrest, the Covid-19 pandemic and an economic recession slammed the market. Rents in nine areas including Sheung Wan, Central, Wan Chai-Causeway Bay and Tsim Sha Tsui fell to HK$309 to HK$914 per square metre, approaching levels last seen 13 years ago.