Hong Kong office landlords grapple with ‘irreversible’ hybrid work trend amid high vacancy rates, supply glut

Flex space provider IWG says it is adding locations rapidly in the Greater Bay Area as property owners seek to capitalise on the trend

IWG works with Hysan Development, and major landlords Hongkong Land and Swire Properties also have their fingers in the co-working pie

Hybrid work arrangements are likely to persist and become irreversible in the foreseeable future, a trend that is spurring landlords and asset owners to convert traditional office spaces into flexible offices, according to the CEO of IWG, one of the world’s largest flex desk service providers.

Globally, companies and organisations are allowing as much as half of their staff to adopt flexible work arrangements, including some combination of working from home, working at a desk in a remote co-working space and coming into a traditional office, said IWG CEO Mark Dixon.

The trend is driving IWG to add new flex space in Hong Kong, across the Greater Bay Area and beyond, Dixon said.

“IWG is growing its network both in Hong Kong and globally at a rapid rate as the demand for hybrid working accelerates,” he said. “Property owners are seeking to capitalise as businesses of all sizes embrace the model, and we can see this trend in our network growth numbers. In the first half of this year, we added more than 400 locations globally.”

In Hong Kong IWG operates 21 locations under the brands Regus, Spaces, Signature, HQ and OpenOffice, with four new locations added so far this year.

The Switzerland-headquartered company reported revenue of £1.7 billion (US$2.1 billion) in the first half of the year, a record-high in its 30-year history and a 14 per cent improvement from £1.4 billion in the same period in 2022. Profit, meanwhile, grew 2.5 times to £94 million, according to its interim results.

In the next two years, 21 per cent of office tenants in Hong Kong are likely to downsize their footprint, according to a property agency’s poll, and the increasing adoption of hybrid work schemes comes at a challenging time for the city’s office property market.

The vacancy rate in Hong Kong’s prime office space hit a record high of 15.1 per cent towards the end of August, according to the agency. Monthly office rental rates have declined 30.3 per cent to HK$54.70 (US$6.98) per square foot from the high struck in January 2019, when office vacancies were at a record low of 3.5 per cent, according to the property agency.

Meanwhile, another 3 million sq ft of office space is expected to become available in the second half of 2023, the agency said.

In co-working spaces, tenants typically share facilities such as pantries, washrooms and meeting rooms with other tenants. Organisations and individuals can subscribe for memberships or lease space, typically with more flexibility than traditional leases, such as shorter duration of tenancy.

Demand is strong across the Greater Bay Area, Dixon said. IWG partnered with Hysan Development in 2022 to set up more co-working spaces in cities such as Guangzhou, Shenzhen, Zhuhai and Foshan, in addition to Hong Kong.

Hongkong Land and Swire Properties, two of the largest commercial landlords in Hong Kong, also run their own co-working businesses.

“There are many reasons why [the hybrid trend] is sort of irreversible,” Dixon said. “It’s what people want, and it’s what companies want at the same time.”

Co-working spaces let companies provide collegial spaces for workers at locations that are closer to home or more accessible than the typical central business district. “It’s much more convenient, and people genuinely want to go and work in an office,” he said. “They want to work with other people. But what they don’t want to do is to spend two hours a day commuting.”

In Hong Kong for example, situating the entire staff in Central would be expensive, so providing another location option, or splitting the workforce among multiple locations, could cut real estate expenses by as much as half, he said.

“For companies, they can hire people over a wider area and they can get more loyalty from many members of a team if they can work in a more flexible way,” Dixon said.

However, Hong Kong’s office property market may see less of an impact from the hybrid trend than other cities, according to another property agent.

“Hybrid caters to the needs of workers who may also have typically longer commutes and more expansive living conditions than those in Hong Kong,” the agent said.

“We expect demand for flexible office space to continue in Hong Kong, albeit at a slowing pace in the medium term. A form of hybrid exists for many companies in Hong Kong, but the extent of the direct impact on office space is considerably smaller than that of other global markets.”

Moreover, while lower costs and higher flexibility are attractive, hybrid arrangements have pitfalls, the agent said. These include concerns about productivity and the nurturing of company culture, as well as the junior staff lacking direct support and guidance from their supervisors.

(South China Morning Post)

九記牛腩斥550萬 購中環中心車位

車位造價跟隨樓價回落，吸引投資者入市。例如深投資者「磁帶大王」陳秉志減價逾2成促銷中環中心車位，便吸引到米芝蓮星級推介的九記牛腩以550萬入市。

陳秉志減價放售 連錄3成交

土地註冊處資料顯示，中環中心昨日連錄3宗車位登記，其中B1層雙號車位，以550萬元成交。登記買家為九記有限公司，董事包括潘國興，即九記牛腩負責人。

資料顯示，九記牛腩 (簡稱九記) 是香港一間以牛腩著名的食肆，多年來均獲米芝蓮星級推介，座上客包括陳奕迅、梁朝偉、何超蓮等等，前任香港特區行政長官曾蔭權3代皆有光顧，九記現由潘國興經營。

方潤華家族 購兩相連車位

其次，中環中心B2層2個相連車位，以每個468萬元成交，新買家為方潤華興盛有限公司，公司董事包括方文雄，即協成行方潤華家族。

資料顯示，深投資者「磁帶大王」陳秉志持有35個中環中心車位，本月初減價促銷，售價由438萬至550萬元。翻查近期成交，中環中心地庫2樓及3樓各一個車位分別以600萬及538萬元成交，今批車位較市價低約20%。

另外，太古地產 (01972) 劈價3成促銷鰂魚涌太古城車位，其中有投資者斥資近2,559萬元掃14個車位，而恒地 (00012) 執行董事葉盈枝據悉亦有入市。

另一方面，土地註冊處資料顯示，長沙灣泓景臺2樓停車場單號車位，本月初以154萬元易手。據悉，原業主為前長實地產投資董事黃思聰，其於2006年以約16萬元購入，持貨17年帳面升值約9倍。

(經濟日報)

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