Hong Kong Companies Seek Flexible Office Solutions Amid Economic Shifts

Hong Kong is one of the main places in Asia to do business, despite the pandemic significantly impacting the local economy. Although Bloomberg recently estimated that the city lost US$ 27 billion during this period, its GDP expanded by 3.2% in 2023, reports the financial company. This resilience highlights Hong Kong's strategic advantages. Its proximity to China and other emerging markets in Asia-Pacific facilitates connectivity and trade. The city is known for being business-friendly, with low taxes and simple regulations, which continue to attract international companies that left during the stringent pandemic rules. It also offers a variety of flexible office spaces to suit different business needs.

Hong Kong provides a variety of office types to meet diverse business needs. Traditional private offices, typically leased from landlords or through agents, are categorised into three grades: A, B, and C. Grade A buildings, often found in prime locations like Central, feature high-end facilities. Grade B and C buildings are more budget-friendly in older buildings or outside major CBDs. Coworking spaces and serviced offices are on the rise, providing ready-to-use workspaces that attract startups, small businesses and international companies seeking flexible lease terms.

Currently, the office rental market in Hong Kong is changing. Reports state that the cost of office rents, especially for Grade A buildings, are expected to decrease by at least 2% this year, mostly because of a slower economic growth and higher interest rates. For example, in Central, the most iconic business district in the SAR, rents dropped to HKD 93.1 per square foot, while the vacancy rate hit a high of 15.9% in late 2023. Many companies are reducing their office space due to economic uncertainties. JLL reported that Central rents fell by 2.4% in February 2024 as more tenants gave up space. According to a survey by Colliers, 67% of businesses in Hong Kong plan to downsize their office space to cut costs, partly due to the rise of hybrid work models, where employees split their time between home and the office.

"As a consequence, flexible office solutions, like serviced offices, are in high demand because they allow companies to easily adjust their space as needed," says Mimi Lee from Bela Offices. "These flexible options offer businesses the ability to scale up or down without the burden of long-term leases. Companies can adapt quickly to changing needs, whether it's expanding their team or reducing space during slower periods. This adaptability is crucial in today's fast-paced and unpredictable market environment."