Mainland Chinese property companies are reducing their presence in Hong Kong as they struggle to weather a liquidity crunch that has rocked the sector and forced the world’s most indebted developer, Evergrande, into default.

Cash-strapped property company Kaisa, China’s second-largest offshore bond issuer after Evergrande, in December sold an entire floor of the Center, a prime office tower in Hong Kong’s Central District.

Real estate agents said China Aoyuan, a developer based in southern China’s Guangzhou city, tried to sell a 117,000 square foot office building in Hong Kong’s Kowloon district that it hoped redevelop.

Land sales, which account for a significant portion of Hong Kong’s tax revenue, have also been affected. None of the sites tendered under the government’s land sale scheme this year and last were awarded to mainland developers. In 2020, at least eight of the 15 tendered sites were awarded to companies linked to the continent.

“Lower demand is expected from mainland developers at least by 2022 and 2023,” said Hannah Jeong of real estate agency Colliers in Hong Kong.

Mainland developer Evergrande defaulted on its overseas bonds in December amid a liquidity crunch that has spread throughout China’s vast real estate sector.

Analysts said the territory was also suffering from a drop in demand for high-end office space from a wide range of mainland tenants.

Savills, the real estate sales company, said this was partly due to China’s anti-coronavirus closure of the border with Hong Kong and President Xi Jinping’s crackdown on opulent displays of wealth, as well as the wider impact of problems in the real estate sector.

Analysts predict that high-end office rents in Hong Kong will fall by at least 5% this year.

The softening outlook is expected to hurt the fortunes of major Hong Kong property developers, including Jardine Matheson, one of the territory’s oldest and largest business conglomerates, and Hong Kong-listed property company Great Eagle Holdings.

“Companies from the mainland made up a large part of the demand. Consequently, demand weakened. . . should put pressure on [rental prices in] the central district,” Jeong said.

Mainland Chinese companies occupy more than a fifth of office space in many buildings in the city’s business district, according to data from Colliers. But eight out of 10 prime office buildings have seen a drop in the proportion of their tenants coming from the mainland since the start of the pandemic.

The proportion of mainland tenants at Exchange Square in Central, owned by Jardine Matheson’s Hongkong Land, has increased from around 27 and 15 percent in 2019 to 23 and 11 percent, respectively, in 2021. In ICBC Tower, also located in Central and owned by Great Eagle’s Champion Reit, the proportion fell from 46% in 2019 to 39% in 2021.

Along with weaker demand from mainland businesses, estate agents also pointed to the impact on rents from multinational companies relocating staff to the region to avoid Hong Kong’s strict Covid-19 policies.

In contrast, prime office rents in Singapore are expected to increase by up to 10% by the end of 2022. Prices in the city-state have already seen quarterly growth of more than 2% this year, according to latest figures from JLL Singapore, the real estate company.

Tay Huey Ying, head of research and consultancy at JLL Singapore, said an increase in the number of Hong Kong companies relocating roles to Singapore “could accelerate thanks to Singapore’s growing attractiveness as a business centre”.

Video: Evergrande: The end of China’s property boom