With record office supply and tenants flocking to premium towers, landlords convert assets to co-working and student digs to survive
“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.
