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News Release

Hong Kong and Macau

Hong Kong’s CBD Needs Sustainable Expansion To Maintain Its Status As International Financial Hub


HONG KONG AND MACAU, 4 May 2011 – As prime office rents in Hong Kong continue to increase and competition for top quality office space reaches a level not seen before, the city is in need of a clear, long-term strategy for an expansion of its business districts in order to maintain its attractiveness in the region. Jones Lang LaSalle is of the view that the catalyst for sustainable commercial development remains in and around the booming non-core commercial district Kowloon East where there is a plentiful supply of high-quality office stock and a pipeline of new developments, according to its latest white paper -- The World's Most Expensive Location...Or A City in Metamorphosis?

As one of the world’s leading financial centres, Hong Kong has long outgrown its ability to leverage on the 23 million square feet in Central (CBD). By international standards, Hong Kong’s traditional CBD is compact,  compared to London’s West End, City and Midtown at approximately 130 million square feet and Lower and Midtown Manhattan at 240 million square feet.
 
With a limited supply of expandable sites and new commercial developments in traditional business districts in the short term, Hong Kong is expected to face an ongoing and growing demand for prime office spaces in the coming years.

“Developing the CBD is not a sustainable model for Hong Kong’s economic growth. The time may be ripe for Hong Kong to break with its location centric taboos and rethink traditional attitudes to which industries ‘need’ to be where,” said Gavin Morgan, Deputy Managing Director and Head of Leasing, at  Jones Lang LaSalle Hong Kong.

“Hong Kong needs to look beyond the CBD with a re-examination of occupation patterns and where the government is promoting or in support of further development towards the city’s metamorphosis, enabling it to consolidate its position in Asia and the world, while providing adequate, affordable accommodation to existing, expanding and new occupants.”

One of the early adopters of a change in attitude is the accountancy profession, which used to be a traditional occupant of the CBD, with many of its major players moving a high proportion of their portfolios out of Central.

Jones Lang LaSalle believes a clear path towards the sustainable growth of Hong Kong’s business sectors has already been set, supported by the plentiful supply of future Grade A office in the rapidly emerging Kowloon East district as a major non-core commercial hub.

This development is further strengthened by the Government which announced in the latest budget to put up two public sector sites in Kowloon East for public land sale.

“The Government’s decision to include these two sites will help boost the growing acceptance of Kowloon East as a commercial cluster and pave the way for developers to further invest in turning this part of the city into the next prime commercial location,” said Gavin Morgan.

Kowloon East is unique in having a high combination of privately and publically owned sites, ripe for conversion and development into Grade A offices. With the completion of a number of brand new office projects in the past five years, redevelopment in the district has the potential to filter into the market year on year. It is also able to offer the scope for design and built solutions for tenants in addition to developer/occupier partnerships.  Along with the redeveloped Kai Tak Airport site scheduled to complete in 2015/2016, a total of 7 million square feet of office accommodation will be added in a location immediately adjacent to Kowloon Bay and Kwun Tong, highlighting how Kowloon East is set to emerge as the largest commercial district in Hong Kong.

On the other hand, the migration of non-core office users to Kowloon East will free up spaces for the CBD occupiers currently located in Wanchai / Causeway Bay and Hong Kong East. The further improvement of these Hong Kong Island submarkets will also see new office accommodations become available, either out of refurbishment or redevelopment of existing buildings, providing core tenants with a wider choice of CBD options in the long term. 

Gavin Morgan added, “It is hoped that through further commercial development in Kowloon East and a facelift of the existing core commercial districts that dependence on the traditional CBD could be reduced.”

To maintain its position as Asia’s World City, Hong Kong constantly faces pressure from all sides. Expanding the CBD in the way suggested by Jones Lang LaSalle will allow Hong Kong to develop with a combination of re-use of existing premises and new development which, in turn, will provide adequate and affordable office spaces to attract and support the development of businesses seeking to be based in this city.