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News Release

Hong Kong

Can Hong Kong Maintain Its International Finance Centre Status If It Fails To Address Occupiers’ Needs in Commercial Property?

As the world economy rebalances in favour of Asia and multinational corporations and state-owned enterprises ramp up their expansion plans, Hong Kong is urged to address its provision of large floor plate offices with green design in order to maintain its status as an international finance centre, or could risk losing its position to rivals from around the world and in Asia, according to Jones Lang LaSalle’s latest white paper – Leading Asia to Dominance.
A survey by Jones Lang LaSalle of occupier respondents, all multinational corporations in the Finance, Insurance, Real Estate and Business Services (FIREBS) sector in Hong Kong, reveals that these occupiers are seeking offices with larger floor plates. In general, they prefer floor plates at 30,000 sq ft or above, in high-rise buildings and preferably landmark towers, at core business districts (CBD). In particular, investment and retail banks require floor plates for general office use to be at least 25,000 sq ft and preferably up to 50,000 sq ft, and even larger for trading floors as they have in New York and London. The accountancy industry also prefers floor plates of 25,000 sq ft or above for both front and back offices in order to maximise efficiency.
‘Global trends and our survey show that there is a strong preference by multinational corporations for larger floor plates as they enable increased efficiency and therefore comparatively less space than in buildings with smaller floor plates.  Companies also benefit from greater business synergies with more employees together and face much fewer complications with initial fit-outs and subsequent rearrangements of space,’ reports Ben Dickinson, Regional Director and Head of Tenant Representation of Jones Lang LaSalle Hong Kong.
A comparison in large floor plate office supply with other international cities shows why Hong Kong is at a disadvantageous position to address this imminent need. Currently, the supply of large floor plate office space in Hong Kong is considerably lower compared with that of other leading cities: of all Grade A office spaces in Hong Kong’s CBD districts, only 3% reaches the standard of large floor plate, i.e. 30,000 sq ft or above, while there is 64% in New York and 25% in Tokyo. London, although sharing the same percentage with Hong Kong, is developing a significant portion of its new supply in alignment with its rivals and also through the bespoke solutions in Canary Wharf where occupiers can specify their needs and premises be built to suit.
Hong Kong’s regional competitors – alert to these requirements and challenges – have also been taking actions: in Singapore, 3.7 million sq ft of large floor-plate office space is slated for 2011-2014, while Shanghai has 1.8 million sq ft for the same period. Given the size of each market, these additions will form a significant proportion of their future supply.
‘Hong Kong must embark on adding provision of this type of office space in order to remain competitive in the commercial real estate market in the region, or else the city may risk losing its status to other international finance centres around the world and in Asia. It is time for the city to rethink its commercial property offering and use real estate as part of its differentiated offer to business, demonstrating global best practice,’ says Gavin Morgan, International Director and Head of Markets of Jones Lang LaSalle Hong Kong.
To remain at the forefront of the commercial property sector, the most urgent and important step for Hong Kong is to ensure the provision of a long-term and steady pipeline of CBD commercial property which will set new global standards, including the provision of offices with larger floor plates, and ensure a relatively cost competitive supply compared with other major business centres in the region.
The survey also points to the opportunities for Hong Kong to expand its compact CBD. The lack of space in the established CBD districts is driving opportunities for introducing large floor plate offices to decentralised locations such as West Kowloon, Kowloon East and Kai Tak redevelopment site. In the survey, the finance and accountancy industries have expressed these views whereas front offices are still preferred in Central and Admiralty – and also Kowloon Station for the finance industry – and they are more flexible in having their back offices in the decentralised locations. This is an opportune time for Hong Kong to expand its CBD to the booming core business districts such as West Kowloon, eventually forming a new fully integrated business district between Kowloon Station and Tsim Sha Tsui.
Directing developers toward larger floor plate designs and at the same time incentivising the creation of new environmental benchmarks such as Red Star and Platinum LEED will enable Hong Kong to become a leader in responsible town planning. Moreover, the nature of large floor plates is conducive to preserving the city’s existing character, as these tend to be low-rise structures that are in harmony with surrounding views and air corridors.
‘Large floor plate offices enable increased efficiency and better synergy with fewer initial fit-outs and subsequent rearrangement of space. Coupled with the expansion of traditional commercial districts and the introduction of new locations, these measures will contribute in maintaining Hong Kong’s pre-eminent position in the region and enable the city to take the next step as a global leader in space provision,’ notes Morgan. ‘To facilitate a growth environment for the business community, it is essential for Hong Kong to manage the supply of commercial real estate into sub-markets where there are shortages as well as potential development opportunities and introduce developments tailored to the needs of occupiers. Providing more large floor plate office space is a step in the right direction.’