Office Decentralization and Functional Obsolescence After COVID-19: Empirical Evidence from Hong Kong

The COVID-19 pandemic, particularly during its declared Public Health Emergency of International Concern (PHEIC) period, has flattened the bid-rent curve and increased the rate of functional obsolescence of older office buildings. A critical question remains as to whether these trends have persisted or moderated following the official end of the PHEIC in May 2023. This study investigates the trajectory of office market dynamics in Hong Kong during and after the PHEIC period. Using secondary transaction data from Hong Kong, we find that the decline in the marginal value of proximity to the central business district (CBD), which was most pronounced during the PHEIC period, has subsequently moderated. In addition, this moderation is significantly stronger for high-end offices than for low-end ones. Furthermore, we find that the functional obsolescence of older office buildings not only accelerated during the PHEIC period but continued and further strengthened after the PHEIC period.