HONG KONG -- Almost half of the business professionals in Hong Kong believe the territory is losing out to Singapore, as skyrocketing office rent is taking a toll on its competitiveness, a survey showed on Thursday.
Some 46% of them perceived Singapore, rather than mainland China, as their top rival in the coming year, up from 38% this year, according to the latest poll by international accounting body CPA Australia.
Those who saw China as a major risk to Hong Kong's position was 44%, compared with 49% this year. Still, more than half expected the territory's competitiveness to slip in 2017.
The relatively gloomy picture was painted by some 230 finance, accounting and business professionals in Hong Kong who were surveyed between August and September.
CPA Australia attributed the anxiety to Singapore's more affordable office space and proactive attempts to attract multinational corporations to set up regional headquarters in the city-state with tax benefits.
"Hong Kong's Grade-A office rent is much more expensive than that in Singapore and is hurting its own competitiveness," said Peter Lee, a wealth management professional and CPA Australia's divisional president for greater China in 2013.
Hong Kong is the world's costliest city to rent offices in its skyscrapers, with annual rent reaching $278.5 per square foot, far ahead of runner-up New York at $158, according to property consultancy Knight Frank in a September report.
Singapore only ranked eighth with an average rent of $72 per square foot, thanks to ample new office supply and a bigger central business district -- about 1.5 times the size of Hong Kong's.
High office rents in Hong Kong's core districts including greater Central and Tsim Sha Tsui have already triggered a wave of decentralization by some multinational corporations to cut costs.
In the third quarter, luxury retailer Burberry Asia relocated from the commercial hub of Causeway Bay to the east of Hong Kong Island. Pacific Basin Shipping abandoned its office in Central and moved to Island South. Insurers like Manulife and AIA Group have sought back-office space across the harbor in Kowloon East.
"Office rents in core districts are yet to reach a historical high but they are close," said John Siu, Hong Kong's managing director at consultancy DTZ/Cushman & Wakefield, who expected prime office rents to peak and gain at most 1% in the last quarter of this year.
Overall office rents have been climbing since the start of 2015 but growth in the third quarter has narrowed to 0.2%, compared with the last quarter. The availability of office space in the next 12 months also continues to rise in core districts.
Meanwhile, mainland Chinese companies have been aggressively taking up offices, accounting for 100% of major new leases in greater Central in the third quarter. Huarong International Financial and developer Agile both took up offices at the upscale Pacific Place operated by the property arm of Swire Pacific. The life insurance unit of Bank of China also rented a new office in Tsim Sha Tsui.
DTZ's Siu expects mainland companies to underpin rental growth in core districts in the next quarter, but adds that their absorption rate might not entirely compensate for the retreat of multinational corporations. "They tend to look for trophy buildings such as IFC (International Financial Centre) and Cheung Kong Center that are already short in supply."