Landlords may need to refurbish or convert commercial real estate to better accommodate artificial intelligence technology, according to experts

Hong Kong’s older office assets and their struggling landlords could face more challenges as the wider adoption of artificial intelligence (AI) by firms in the city leads companies to relocate to newer buildings that better support their requirements, according to a real estate consultancy.

AI is poised to usher in more changes in Hong Kong’s commercial office space, and landlords may have to act fast to either refurbish their assets or convert them for new uses, a real estate consultant said.

“If you want to bring buildings up to an appropriate standard in a world of AI, going forward there should be energy resilience, energy supply, connectivity and technological infrastructure,” the consultant said.

“All of those things are an additional layer to get those buildings to the right standard.”

Nearly two-thirds of private offices in Hong Kong will be over 30 years old by 2030, according to official data cited by the real estate consultancy.

A separate estimate last year by another real estate consultancy found that about a fifth of Hong Kong’s ageing buildings were potentially facing obsolescence, with declines in both value and efficiency.

Currently, corporate tenants are increasingly relocating to top-tier buildings in central locations in the city, leaving older buildings in outlying areas with more unoccupied office space.

The real estate consultancy’s data showed that in Central, prime office spaces have seen a 10 per cent growth in rental prices in the 12 months to April, on the back of strong leasing “driven by financial services, a flight to quality and future-proofing for expansion by large institutional occupiers”.

Other office locations, however, saw rents grow by only 1.9 per cent and, in some cases, rents declined by as much as 13.3 per cent over the same period.

Office spaces may be set to become learning hubs, as organisations reskill and upskill their staff in AI tools and practices, the consultant said.

“Organisations and occupiers of all types have two choices to make: they either ... try and fight for ... talent, which is incredibly expensive, or they have to generate and grow their own talent,” the consultant said. “And the way they’re going to do that is to upskill and reskill staff, and as a result, the office becomes a place of learning as well.”

This could mean offices transform over the next 10 years to “enable people to learn, so it will be an event space, there will be teaching rooms, there will be links with universities and there will be corporate training,” the consultant said.

Amid concerns of more lay-offs and headcount reductions as companies invest more in AI tools, new teams and new positions would also be created to check the quality of work created by AI or assisted by it, another consultant said.

“We’re likely to see certain areas or new areas within companies grow, and then new businesses developed,” the consultant said.

“There’s going to be certain industries where certain functions within those industries may have lower headcount in the future, but they may also have a new AI team internally that wouldn’t have existed three to five years ago.”

Some Hong Kong landlords are likely to plan to convert their office spaces into student dormitories or senior living spaces.

For landlords that would be unable to fully convert their office assets, the consultant said there were “phased-in” options as well as “creating turnkey solutions for occupiers and managed solutions for the medium-sized occupiers.”

“If you can create a fully fitted turnkey solution on a reasonably flexible lease, but you take away all expenditure constraints that the occupier faces, and you create a solution with a single price that is attractive to the occupier,” the consultant said.