Hong Kong law firms cut office space in new blow to business hub
HONG KONG’S biggest law firms are rushing to reduce office space in prime locations, as they struggle with a dearth of mergers and acquisitions and initial public offerings amid an economic downturn.
Deacons, the city’s oldest law firm, is cutting one floor in Alexandra House, a premium office building in Hong Kong’s business district of Central, according to people familiar with the matter, who asked not to be named because they weren’t authorised to speak publicly. The floor will be released to the market near the end of the year, one of the people said.
DLA Piper, one of the world’s largest legal firms, has reduced its office space in Exchange Square – also in Central – by 465 square metres, one of the people said. Other major legal advisers including Clyde & Co and MinterEllison are also planning to shrink their rental space, the people added.
Hongkong Land Holdings, the real estate arm of conglomerate Jardine Matheson Holdings that operates Alexandra House and Exchange Square, said its buildings in Central are among the most highly occupied properties in Hong Kong, and most of its tenants whose leases expired in 2023 have renewed contracts with the same floor spaces. The company declined to comment on the law firms’ plans.
A DLA Piper spokesperson said while financials and market conditions played a part in the firm’s decision to reduce its office space, the company also considered other factors, including a global flexible working policy and a plan to bring its Hong Kong staff closer to facilitate collaboration. Deacons didn’t respond to a request from comment.
Sun Hung Kai Properties, which co-owns the Central Plaza that houses Clyde & Co’s office, and Hopewell Holdings, the landlord of MinterEllison, didn’t respond to requests for comment.
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The space reductions highlight the malaise of Hong Kong’s economic slowdown, which saw its benchmark Hang Seng Index of equities fall 14 per cent last year, among the world’s biggest decliners. Funds raised by initial public offerings are the smallest since the dot-com bubble burst. Global investors have been increasingly cautious about China – the biggest source of business for the city’s financial service industry – amid rising tensions with the US and one of the country’s worst property market routs in decades that sent major developers defaulting on their debt.
China’s real estate market crisis is rippling across Hong Kong, and the city has also been challenged by rising borrowing costs. An exodus of expatriate and local professionals, partly driven by concerns over Beijing’s tightening grip, has added to the blow. The Chinese territory has been dubbed the “ruins of an international financial centre” on Chinese social media, even though local officials rejected the label.
Like investment bankers and private equity fund managers, Hong Kong’s commercial lawyers are among the worst hit in the downturn.
Linklaters laid off 30 lawyers from its offices across China last year, citing a “prolonged downturn in the China market.” Winston & Strawn closed its Hong Kong office this year, leaving Shanghai as its only presence in Asia. The firm said it made the decision after analysing changing client needs and the legal market in Hong Kong, the Global Legal Post reported.
Law firms in Hong Kong are also battling competition from rival financial hub Singapore. They’ve been an important source of rental income for Hong Kong’s commercial landlords. With vacancy rate hitting a historical high in 2023 at more than 16 per cent, office rents are expected to drop as much as 10 per cent this year, according to CBRE Group. BLOOMBERG
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