Repurposed college homes may address Hong Kong office slump

Grade B and C offices are likely to benefit from the conversions.

Property companies in Hong Kong should consider converting more commercial buildings into student housing, apart from halting commercial land sales, to address the city’s office slump, property analysts said.

“These measures will help office absorption, while offering more housing options in the market, stabilize rents, and effectively address the challenges associated with the shortage of student beds,” Rosanna Tang, executive director and head of research at Cushman & Wakefield Hong Kong, told Hong Kong Business.

The education sector has been driving the demand in Hong Kong’s commercial property market in the past six months, said Kathy Lee, senior director and head of research and retail consultancy at Colliers Hong Kong.

She cited Hong Kong Metropolitan University’s acquisition of One HarbourGate East Tower in Hung Hom to bridge the gap in student accommodations.

This is similar to when office buildings were converted into hotels when the tourism market was booming, Lee told Hong Kong Business via Zoom.

“Once the government allows this conversion from office to student accommodation, we expect some Grade B or Grade C office buildings to consider such conversions,” she added.

One in three university students in Hong Kong are vying for a single campus bed, with demand possibly exceeding 50,000, Tang said. 

She added that some students have been forced into the private rental market, making the government's move to rezone commercial sites for residential use a timely decision.

The rezoning was part of budget measures, along with pausing commercial land sales for fiscal year 2025-2026, amidst rising office vacancies and sluggish sales. The government sold only six commercial sites from 2010 to 2024.

With 13.5 million square feet of net leasable area in Hong Kong’s Grade A office market, Tang said it would take five to six years to bring vacancy rates down to single digits, assuming an annual net absorption of 1.2 million square feet and no economic shocks.

Hannah Jeong, head of valuation and advisory services at CBRE Hong Kong, said it would take seven years for the commercial market including industrial space to stabilize, assuming a yearly take-up of 1.6 million square feet.

She noted that whilst the government is suspending commercial land sales until next year, land transactions are still possible through other agencies that are not covered by the ban, such as the Airport Authority Hong Kong and West Kowloon Cultural District.

The Northern Metropolis project is another area where land sales will continue. “The impact [of the halt] is relatively minor in the current market climate,” Jeong said via Zoom.

Still, Lee expects the sales halt to give the market time to take up some of the available space, allowing it to “pivot” from high vacancy rates.