Demand for office space in Hong Kong surges

Supply will remain unmet over the next decade.

CBRE Group, Inc. a leading commercial realtor, said new prime office supply over the next nine years won’t be enough to meet half of the forecast demand for space.

And this despite government plans to add 8 million square feet of office space by 2020, CBRE said in a report with Daiwa Capital Markets. Hong Kong companies will need 17 million square feet of new space in the period.

Demand is being driven by staff expansion in banks, law and accounting firms. Taken with the shortage of new supply, this has made the average office occupancy cost in the central business district the world’s highest.

“Vacancy rates look likely to remain very tight throughout the whole decade,” the CBRE report said. “Supply is inadequate not only in terms of quantity but quality.”

CBRE said there will be no new buildings to be built before 2017 with a single landlord and floor area of more than 10,000 square feet, which is preferred by most large tenants.

Hong Kong’s office occupancy cost was 11% higher than London’s West End, the world’s second-most expensive place to lease commercial space, at the end of the first quarter. Hong Kong firms have been moving offices away from the CBD to less expensive areas.