With some 3.5 million sq ft of new premium office space expected to be completed this year and next, on top of the 4.5 million sq ft added in 2024 and 2025, tenants are increasingly choosing to relocate to new and modern offices, leading to diverging fortunes for big established landlords and non-premium asset owners.
“The persistent ‘flight to quality’ creates a profound and escalating challenge for owners of older, non-prime office buildings,” said Jack Tong, director for research and consultancy at Savills Hong Kong.
“As corporates from high-value sectors consolidate into modern, ESG [environmental, social and governance]-compliant buildings, the demand for secondary space contracts to smaller local businesses, back-office functions and start-ups – all of which are highly price sensitive and have more options.”
This situation is forcing landlords to offer significant rent concessions to keep tenants.
“For [many] landlords, asset obsolescence is no longer a distant risk but an immediate threat to cash flow and asset viability,” Tong said.
