(Bloomberg) -- Hong Kong’s government will refrain from selling commercial sites in land tenders this quarter as the office market continues to suffer from high vacancy rates.

“It’s reasonable for us to pause” on the sale of commercial plots in the fiscal third quarter ending Dec. 31, Secretary for Development Bernadette Linn told reporters on Wednesday. “We see that the vacancy for commercial space is on average at 10% or more.” 

The office market downturn has left Hong Kong’s government in a dilemma. On the one hand, selling land now will only fetch a low price given developers’ pessimism. But holding onto the sites until the market recovers will deprive the city of revenue from land sales as it tries to repair finances that remain strained due to a weak economy.

Even though leasing demand slightly improved in the three months to September, the vacancy rate citywide remains close to a historical high at 15.8%, according to CBRE Group Inc. That’s put pressure on Grade A office rents, which have slipped 3.6% since the beginning of the year.

The government last auctioned commercial land in March, when Sun Hung Kai Properties Ltd. won a site in Mong Kok for HK$4.7 billion ($600 million), much lower than its previous valuation of more than HK$20 billion in the previous year.

Land sales have long been a major source of income for Hong Kong to maintain a low tax system. The citywide slump in real estate hitting both residential and commercial sectors has hurt revenue.

The government reached only 18% of its annual targeted land sale revenue of HK$85 billion in the first six months, according to Midland Realty. The fiscal year ends in March 2024.

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