Hong Kong’s strategy for HKIC to prop up city’s office market seen as challenging

Hong Kong’s government-backed investment fund is being redeployed to support the city’s sluggish commercial property sector, signaling authorities’ growing willingness to use public funds as a policy tool to steady office valuations and align real estate investment with the city’s industrial ambitions.Attracting foreign institutions, however, might prove challenging. The city’s elevated vacancy rates, looming new completions and uncertain rental recovery have kept global funds on the sidelines, while acquisition costs – combined with the capex required for conversion – may compress returns, according to analysts.According to HKIC chief executive Clara Chan Ka-chai, the strategy would create “deep synergy between industry and space”, channelling long-term capital into commercial assets. She said it is expected to support enterprise development, while delivering medium- to long-term returns.Although market sentiment saw a recovery last year and the leasing market returned to activity, the overall vacancy rate for grade A office space remains high at 17.5 per cent, with a total vacant area approaching 15 million square feet. The market still requires time to absorb the new supply completed over the past few years, according to Fiona Ngan, head of occupier services at international property consultant Colliers.Established in 2022 as a wholly government-owned investment vehicle, HKIC was created when parts of Western institutional capital were pulling back from Hong Kong amid heightened geopolitical tensions. Its initial mandate focused on strategic sectors including hard technology, life sciences and green energy, with the aim of anchoring future industries in the city.