In finance, one of the most basic yet powerful ideas is the “time value of money” — the notion that a dollar today is worth more than a dollar tomorrow. It captures opportunity, momentum, and the compounding effects of action over time. Yet, in Hong Kong’s real estate landscape, this simple truth has been largely ignored.

Hong Kong’s office and commercial vacancy rates have reached historically high levels while rents have fallen, driven by a combination of a massive supply pipeline and structural shifts in demand.

The problem seems obvious, and so might be the solution: lower rents. Businesses that are not viable at one rent level suddenly make -sense when the proportion of their expenses allocated to the landlord decreases. And viable businesses stimulate employment and have numerous positive secondary effects for communities, citizens, and even government finances. A major issue, however, is that many landlords hold out for yesterday’s rents, unwilling to adjust expectations or compromise, for fear of tarnishing the rental market value — and the capital value — of their properties. This is particularly apparent in the community and street-level shops, as their empty, boarded facades remind everyone of a challenging market, when in fact it might be vibrant and growing if those shops were active and occupied. While tactics such as rent-free periods provide face-saving ways for landlords to preserve a headline price for their properties, the reality is that a significant proportion of the owners of Grade B and C retail space in Hong Kong acquired their properties so long ago that they can afford to leave them vacant instead of flexing to actual market rates. They sit on significant unrealized capital gains and, as a result, cut off the opportunity for this real estate to fuel economic activity. In a city uniquely good at generating revenue from finance and property, these vacancies have been increasingly eroding Hong Kong’s energy.

Given today’s economic scenario, relatively low inbound tourism (due in part to closed shops and restaurants), trips from Hong Kong residents across the border for weekends (again, due to less activities in our street-side economies), and the fact that the government revenue is so highly, disproportionately weighted on property tax revenues, this is a perfect opportunity to introduce such a vacancy levy.

By leaving properties idle, landlords are effectively erasing future cash flows in exchange for short-term ego protection. The time value of money principle teaches us that money, when allowed to flow — whether through rent, investment, or even discounted sales — creates value. Idle properties, on the other hand, represent dead capital.

Each month of vacancy is not a heroic wait for markets to turn; it’s a measurable financial loss. The face-saving empty unit silently depreciates in real terms, as inflation, maintenance costs, and lost rental income accumulate. The economy misses out on demand from entrepreneurs and new businesses, and the community loses foot traffic and vitality. There is no “win” in the waiting game — only a slow leakage of economic potential for the landlord, residents, and society.

Low taxes and duties are among Hong Kong’s great strengths, driving the city’s strategic global position as a hub for financial services, logistics, and many other sectors. New taxes are never popular and risk adding business friction. However, a levy on unoccupied square footage can be a business accelerator, motivating the lease of space rather than a punishment. The idea is simple: If a commercial or residential property remains vacant for an extended period without legitimate cause, a modest levy is applied, and the funds collected are placed in a special trust, with the funds allocated to support community development. The initiative isn’t meant to shame or penalize but to nudge capital back into motion. Cities like Vancouver, San Francisco, Baltimore, and Melbourne, and countries like France and the UK, have already implemented similar incentives.

Hong Kong’s landlords are pivotal figures in the city’s economic story. They hold significant power and, whether they recognize it or not, an integral collective responsibility to keep the city dynamic, accessible, and alive. Contributing to a vacancy trust is an opportunity for them to be part of a healthy partnership between private capital and the public good

Hong Kong’s landlords are pivotal figures in the city’s economic story. They hold significant power and, whether they recognize it or not, an integral collective responsibility to keep the city dynamic, accessible, and alive. Contributing to a vacancy trust is an opportunity for them to be part of a healthy partnership between private capital and the public good.

Many long-term property owners in Hong Kong might not care about monthly income, as they have made their money many times over, but empty spaces are bad for Hong Kong. Empty storefronts bring no engagement for the community, fail to create jobs and inspire commerce, and are bad for Hong Kong’s brand and image in the eyes of visitors. Some argue that this is not part of a free-market mechanism, but Hong Kong has never been a free market in the way that property has been controlled by a relative few, and not cared about by the others who own the property and either don’t want to lose face, or simply can’t be bothered to make an effort to bring life back to their properties and sources of some of their original income. Claiming it is a “free market” when it is more like a “greedy, lazy system” does not mean it is thriving with diverse business excitement, visitor engagement, stable and real, across-the-board potential for property value increase, brand value, and scaled business revenue. This should absolutely be attempted, and Hong Kong can be a role model for other world cities in this sense, too, many of whom are also in post-COVID-19 shock with the same poor real estate dynamics.

Balancing the option of paying a levy with the slightly lower stream of rental revenue, the choice should be obvious. This initiative has the potential to fill ground-floor shops with entrepreneurial ventures, digital startups, and small cafes. Even filling a small proportion of the currently vast vacant office space with new startups, small and medium-sized enterprises, and hybrid workspace tenants will add creative energy and financial potential to the business ecosystem.

Let’s be honest: Those who bought property in the 1970s or 1980s have already won the game. They benefited from decades of appreciation, turning modest investments into vast fortunes. Yet, in many cases, this success has bred complacency instead of creativity. Those who live off paper property gains can dull the entrepreneurial spirit that once defined Hong Kong.

A vacancy levy sorts the proactive from the passive. Those who adapt, renovate, and rent out will prosper. Those who sit back and hoard empty spaces, expecting the city to revolve around their valuations, will pay the price for inaction. It’s a market correction wrapped in civic logic.

Hong Kong has always been about motion — trade, markets, and a restless pursuit of opportunity. Ignoring the time value of money immobilizes all three. Every darkened shopfront drags the Hong Kong brand down; it signals stagnation, not success. Tourists notice it, investors feel it, and young entrepreneurs are demoralized by it.

To recapture the city’s rhythm and former vitality, we must reward activity, not inertia. Contributing to the vacancy trust is an open invitation to help the city regenerate and turn static wealth into dynamic progress. Landlords who rent will find renewed profitability, goodwill, and community presence. Landlords who hold their properties off the market will pay the real cost of inaction.

Doug Woodring is founder and managing director of Ocean Recovery Alliance.

David Ketchum is CEO of Current Asia.

The views do not necessarily reflect those of China Daily.