The current state of the office space market in Hong Kong is alarming. The vacancy rate for premium office spaces is approaching 15%, which is equivalent to 20 million square feet of empty floor space. This is a massive area, almost as much as the combined size of the ten IFC towers in Hong Kong. The situation has become so dire that many multinational companies have withdrawn their headquarters and branches from Hong Kong. The government is aware of this issue but has yet to come up with effective policies to save the business district. Instead, they are building more commercial areas in the north. This will only aggravate the problem and may lead to "overdevelopment," which is predicted to become the main topic of discussion in Hong Kong's public opinion over the next ten years.
On the other hand, Singapore is facing a different problem with its commercial buildings. They are tearing down racecourses just to have enough land to build more office spaces. In Hong Kong, the value of commercial buildings has dropped by a staggering 26% in the past five years, and rents have fallen by 29%. The "new normal" of working from home for the past three years has also played a role in this. While it used to be the dream of countless people to work in a big office on the top floor, now even CEOs don't have their own fixed office space. A multinational corporation might only rent a desk, and it's difficult to see how this trend will reverse.
In recent years, Western countries have also changed their stance and are promoting a return to the office, arguing that working from home is not good for corporate governance. This is quite a surprising turn of events, considering that remote work was initially seen as a way to prove that offices don't need too many people to function properly. However, it turns out that a city really does need a lot of people in offices to maintain its vitality. The city needs every person to endure long hours and maintain its vibrancy.
When the big landlords see that the situation is not good, they'll quickly sell off their old commercial buildings. If no one wants to buy, they'll regret it too late. Some have already experienced this, like Citibank, who bought a commercial building from the 1960s in San Francisco for $108 million in 2005, then put it up for sale for $160 million after the pandemic. However, it eventually sold for only $42.6 million.