Hong Kong's tycoons are seeing their skyscrapers lose rental values by as much as a third, amid the worst commercial property market slump in more than a decade.
Billionaire Li Ka-shing's Cheung Kong Center led the decline among major offices in the city with a 33 percent drop in rental values in the five years through 2023, according to a local property agency.
New buildings including The Henderson dented rents for existing ones, the agency said.
The plunge in rental income underscores the pain in Hong Kong's commercial market. A weak economy and the retreat of multinational companies have weighed on the sector in the past few years. The city's vacancy rate was at a historic high of 16.7 percent in the first quarter, according to another property agency.
The government assesses the annual rental value of each building to charge landlords a property tax called rates, which are set at 5 percent of the estimated rental value.
Cheung Kong Center , owned by CK Asset (1113) had been about a quarter empty for the past year while a new second-phase building has only managed to rent out about 10 percent of space, people familiar said in May. The Henderson , owned by Henderson Land Development (0012), still had about 40 percent of space vacant as of May.
CK Asset's chairman Victor Li Tzar-kuoi recently acknowledged that new demand for offices wasn't high in the short term, but that he was confident in the future of Cheung Kong Center II .
Adding to the competition, there will be an additional 709,000 square feet (65,868 square meters) of office supply - the size of about nine soccer fields - completed between the second and fourth quarter of the year, according to the property agency.
Apart from the increase in supply, the city's office market has been hurt by international banks' cost-cutting efforts and the slower-than-expected return of mainland Chinese companies.
A lack of investment banking deals has prompted some financial firms to shrink office space. Hong Kong's proceeds from initial public offerings in the first quarter were the lowest since 2009, continuing a dismal run since last year when the city lagged behind Mumbai.
