Hong Kong is facing a commercial real estate crisis, with small and medium-sized developers as well as banks under increasing pressure as capital values slide amid lethargic leasing activity, according to JLL.
The capital value of commercial property was set to drop by “a further 5 to 10 per cent” this year, said Joseph Tsang, chairman of the property consultancy in Hong Kong. Selling commercial properties at such prices is not “practical or realistic”, he added.
That meant the looming crisis could spread to the residential property market, particularly the luxury segment, Tsang said.
“The majority of the commercial real estate investors or owners also own luxury residences,” he said on Wednesday. “Should they, for whatever financial reasons, become under pressure from banks, the only way to get cash would be to sell residential properties.”
The city’s commercial landlords are dealing with high vacancy rates in both the office and retail segments, putting pressure on rents.
In the first half of the year, overall office vacancies rose to 13.6 per cent from 13.2 per cent in the preceding six months. Prime office rents declined by 2.5 per cent in the January to June period, following a 9.1 per cent drop in 2024, JLL said. Since their 2019 peak, rents for the segment have retreated by 41.4 per cent, the consultancy said.
