The European Chamber of Commerce in Hong Kong has delivered a bleak assessment of the city’s business environment, underscored by the finding that close to half of the group’s member companies plan to fully or partially relocate out of the city within the next 12 months.
In a EuroCham survey on the impact of COVID-19 on the business community, 25 percent of respondents said they were considering a full relocation of their offices, with 24 percent mulling a partial relocation. Just 17 percent said they had no such plans, while 34 percent were unsure.
The poll also revealed the extent to which the ongoing crisis has already thinned headcount, with one in three European firms saying that more than 25 percent of their personnel had decided to leave Hong Kong because of quarantine restrictions on international travel.
While acknowledging the city’s low death toll relative to other markets, EuroCham said the results portrayed a “distressing landscape” in which the government’s zero-COVID strategy had come at a very high cost to Hong Kong’s business community.
Brain Drain Warning
The survey queried 260 individuals from European countries’ local chambers of commerce under the EuroCham umbrella, with 70 percent of respondents representing companies with fewer than 100 employees. The British Chamber did not circulate the survey, which was conducted from 18 January to 5 February, while the Swiss Chamber participated despite being a non-member of EuroCham.
The poll’s findings resonated with other recent studies warning of a brain drain in the longtime Asian financial hub, including a survey by the American Chamber of Commerce in Hong Kong, the city’s largest international chamber.
AmCham announced in January that 26 percent of member companies and 44 percent of individuals said they were more likely to leave Hong Kong in light of the city’s COVID-19 restrictions, with Singapore expected to be the major beneficiary.
More ominously, there is a perception that foreign business is less welcome in Hong Kong, according to AmCham, with more than half of respondents saying they felt the government was unconcerned and dismissive. The group surveyed 151 key corporate representatives and 111 individual members.
Bloomberg reported this month that a net 71,000 people left Hong Kong in February, the biggest outflow since the pandemic began, with many of them ending up in Singapore.
Office Leasing Abides
Despite the quickening exodus, Hong Kong’s office leasing market in February largely shook off the bad news, with the net amount of office space leased in the city expanding by 276,500 square feet (25,688 square metres) during the month, according to JLL’s latest Market Monitor report.
The new commitments to business premises included YF Life Insurance International leasing a combined 17,400 square feet of gross floor area at Grand Century Place Tower 2 in Mong Kok and Gateway Tower 6 in Tsim Sha Tsui as the mainland financial services firm expands its agency footprint in the city, the property consultancy said.
The vacancy rate in prime business district Central fell to 7.4 percent from 7.7 percent in January, while Kowloon East continued to have the largest amount of vacant space at 12.4 percent. The city’s overall vacancy rate eased to 9.1 percent from 9.4 percent in January.
Rents were flat at HK$57.50 ($7.35) per square foot per month, with Central registering only a mild uptick and Kowloon East showing the biggest decline.
The investment market recorded a noteworthy transaction when PC Partner Group acquired one high-zone floor in New World Development’s 888 Lai Chi Kok Road in Cheung Sha Wan for HK$388 million (HK$15,750 per square foot), JLL said.