Hong Kong buyers hunt for bargains in city’s battered noncore office market

The noncore office market remains under pressure, but end users are taking advantage of low prices to buy up cheap office space

Hong Kong’s noncore office market is still plagued by high vacancy rates and weak investor demand, but owner-occupiers are taking advantage of the downturn to buy up office space at steep discounts.

The latest example is the Estate Agents Authority (EAA), which agreed a deal earlier this month to buy an office at the OTB Building in Wan Chai for HK$70 million (US$8.93 million), according to Land Registry records.

The 7,343 sq ft unit was bought for HK$9,533 per square foot – below the HK$10,000-per-square-foot mark, but not a dramatic drop compared with the previous transaction recorded for the building. That deal, signed in 2019, was at HK$11,839 per square foot.

Marcus Chu, senior regional director at Ricacorp Properties, said the sale “suggests there is still buying support at current price levels, providing a positive signal for the wider noncore office market”.

But the deal could prove to be an outlier. According to Chu, the relatively limited number of transactions at the OTB Building partly explained the price resilience of offices there. Overall, values have fallen by more than half from their peak in 2018.

Non-core office districts continue to face large numbers of empty properties and weak investor demand, with some locations recording vacancy rates of about 30 per cent, according to Centaline Commercial.

Developers have been cutting prices to clear stock, while distressed office assets and tight bank financing have further depressed valuations.