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Hong Kong

The Renminbi Abroad: Jones Lang LaSalle’s Latest White Paper

Property leasing experts consider effect on Hong Kong’s Grade A office market

HONG KONG, July 11 2012– International property services agency Jones Lang LaSalle today released its white paper The Renminbi Abroad. The paper focuses on the effects of the increasingly-close ties between Hong Kong and mainland China, and how rising levels of Renminbi (RMB) deposits in the city will influence the Grade A office market in Hong Kong.

The paper demonstrates how Hong Kong can utilise its exceptional position in terms of its relationship with mainland China. Over the last few years we have seen a great increase in trade, capital flow and travel between the two markets, and Hong Kong remains the only designated offshore clearing centre for the RMB,” said Gavin Morgan, Chief Operating Officer and Head of Leasing at Jones Lang LaSalle Hong Kong.

Hong Kong is also a leading international market for banking and other financial services, as well as insurance, with 44 of the world’s 50 largest banks located in the city. As detailed in The Renminbi Abroad this is an area that has undergone outstanding growth in Hong Kong, with the financial and insurance sector’s GDP expanding by over 70% from 2010 to 2012.  

Due to the ever-closer ties between each market and the strength of the banking sector, there has been an intense accumulation of RMB deposits in Hong Kong’s banking system following the relaxation of the RMB cross-border trade settlement scheme in mid-2010. This places Hong Kong in a unique position to leverage the growth of RMB denominated financial products and related services. Jones Lang LaSalle believes that this will provide excellent opportunities for the Grade A office market in Hong Kong.

The increase in RMB deposits in the Hong Kong banking system is expected to have a filter-through effect across the city. It is anticipated that this will drive growth in three particular areas of trade settlement, wealth management and capital raising, which in turn is expected to have a positive effect on the Grade A office market.

“We expect the development of Hong Kong as an offshore RMB market to be a major driver of office demand in the city. We believe that the long-term demand for office space in Hong Kong will remain strong. The research paper outlines potentially 40,000 headcounts estimated to be added to the banking and finance sector, translating into demand for up to an additional six million sq ft of office space by 2020,” added Marcos Chan, Head of Research, Greater Pearl River Delta at Jones Lang LaSalle Hong Kong.

The increase in office demand is not expected to be limited to banking and financial services. Jones Lang LaSalle indicate that the overall effect of the growth rising from increasing levels of RMB deposits will be widespread, providing opportunities for accountants, lawyers, insurers and commercial real estate providers as well as banks, asset management companies and supporting business service providers. This will have a knock-on effect across Hong Kong’s office market, giving further effect to the expansion of Hong Kong’s leading office locations.

“We anticipate the growth in demand for premium office space to further facilitate the decentralisation of office space from outside Central. We have already seen an increasing willingness from tenants in the banking and finance sectors to locate their headquarters outside Central, and the wider growth of demand for office space will provide further opportunities for commercial landlords in the long-term future,” concluded Gavin.