Hong Kong’s billionaire landlords are paying agents larger commissions for bringing in office tenants, as developers struggle to fill empty commercial space in the Asian financial hub.

Paying commissions worth two to three months of rent is the new norm, up from just one month several years ago, according to real estate agents familiar with the matter, asking not to be named because the matter is private. Some are getting as much as four months for landing tenants, one of the people added. 

Li Ka-shing’s CK Asset Holdings Ltd and New World Development Co are among landlords paying higher commissions as new office supply hits the market, said one real estate agent who works with some of Hong Kong’s biggest commercial landlords. Hongkong Land Holdings Ltd is another, a different agent said. 

A representative of New World declined to comment. CK Asset and Hongkong Land didn’t respond to requests for comment. 

The surge in finder’s fees reflects the weakness in Hong Kong’s commercial real estate market. A sluggish economy, the retreat of multinational companies and cost-saving incentives have weighed on the sector in recent years. The city’s office vacancy rate was at a record high of 16.9% in the first half, according to CBRE Group Inc. The vacancy overhang pushed rents down 2.1%. 

In general, real estate agents have been paid on average 30% more in commissions since the middle of last year, according to Fiona Ngan, the head of occupier services of Colliers International Group Inc in Hong Kong.

Three-month commissions were offered only once before in Hong Kong, during the severe acute respiratory syndrome, or SARS, epidemic of 2003, Ngan said.

“In really bad days” agents were paid up to three months, while four “is definitely aggressive”, said Bloomberg Intelligence analyst Patrick Wong. Headwinds for Hong Kong’s office market include weak demand, ample supply and remote work, he said. 

There will be an additional 709,000 sq ft (65,868 sq m) of new office space - the size of about nine football fields - completed between the second and fourth quarters of this year, according to CBRE.

  - Bloomberg