Extremely low IPO volumes and ongoing border closure have slowed Mainland office demand.

• The gradual containment of the fifth wave saw more people returning to their workplaces, and the loosening of various social distancing measures also helped revive sentiment in general.
• Stock market turbulence as well as sharp rises in interest rates in the US caused IPO and secondary listings volumes to crumble in the first half, which dimmed the business prospects of Mainland sponsors.
• Cryptos and new economy companies, which have supported the office market over the past three to six months, have seen their fortunes disrupted by heavy value declines (75% to 80%) while some crypto currencies disappeared altogether.
• Even though Mainland office demand has slowed over the first half of 2022, we expect supportive measures from the Central government to gradually revive the appetite for space among Mainland financial institutions.
• On a brighter note, medical groups have been expanding in fringe Central with increasing healthcare demand as well as the lower rents on offer.
• Take-up of new office supply has been slow with some projects achieving close to 50% pre-commitment, while others have not seen significant take-up to date.  
• While rents are expected to decline further over the second half, older stock will face particularly strong headwinds from more modern new supply, greater ESG regulation and changing expectations of the workplace.