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News Release

Hong Kong

New trends destined to shake up the Hong Kong office landscape approaching 2020

Jones Lang LaSalle releases ‘Offices 2020 Asia Pacific’ report discussing the future of offices in Asian cities


hong kong, 13 February 2014 – In 2020, Hong Kong’s office market will have considerably diversified, providing more opportunities for landlords and occupiers than exist in the current market. This trend was anticipated in the ‘Hong Kong Office 2020’ report that was today released by Jones Lang LaSalle, the professional services firm which specialises in real estate. The report anticipates how the market will be shaped over the next six years, identifying the major trends that will impact upon landlords and occupiers leading up to 2020. These trends include:

1.   Rising demand for office space from Chinese corporates;

2.   Evolution of new office hotspots, including Hong Kong East, Kowloon East, Wanchai/Causeway Bay and West Kowloon;

3.  Completion of new public transport infrastructure, making relocation outside Central more attractive to tenants;

4.  New technology and management theories that will influence office architecture and space;

5. Shifting attitudes in tenure, with owner-occupancy increasingly favoured;

6.  Growing demand for sustainable buildings, and a shift towards landlords passing savings onto occupiers.

Hong Kong will gradually become a multi-nodal office market as a result of government policies promoting land supply and the emergence of new transport infrastructure. The shift will be further encouraged by a surge in tenant demand, largely resulting from the growing presence of Chinese corporates.

Gavin Morgan, Chief Operating Officer and Head of Leasing at Jones Lang LaSalle, said: “The real estate market in Hong Kong is set to change dramatically as we approach 2020. It is important for landlords and occupiers to adjust their strategies in order to stay competitive and maximise their returns.”

Trend 1: Growth of Chinese Corporates

The finance sector remains a key driver of employment and office demand. However, many Western financial services companies have adopted new business models, slowing expansion. In contrast, demand for staff among Mainland Chinese banks is projected to be robust. It is expected that up to a dozen Chinese banks will establish an ‘overseas’ office in Hong Kong.

Currently, less than one in eight foreign companies in Hong Kong is from mainland China, despite their number tripling in the last decade. The report indicates that the presence of Chinese companies in the market will grow, driving new demand for office space.

 Trend 2: Emergence of New Hotspots

The report highlights the top four locations likely to emerge as core front office locations by 2020:

- Hong Kong East: The evolution of front office users outside Central will likely materialise in Hong Kong East initially. As a mixed-use precinct that includes offices, retail outlets, hotels and serviced apartments, the district is attractive to corporate occupiers. The completion of the Central-Wanchai Bypass and Island Eastern Corridor Link by 2018 will further enhance the accessibility of the district.

- Kowloon East: The full potential of Kowloon East may not be realised by 2020 due to extensive infrastructure demands. However, it will eventually thrive as the mid-office location for operational staff of large foreign companies, as well as the front offices of non-finance corporates. No single landlord dominates the district, so Kowloon East is likely to grow with a diverse ownership structure.

- Wanchai/Causeway Bay: The completion of the Exhibition MTR station on the Shatin-Central Rail Link, coupled with the release of developable land, is likely to return the market focus to this district. The area is projected as the primary choice for professional service providers serving clients in Central and Hong Kong East.

- West Kowloon: Although the high-speed rail link between China and the heart of this district will spur further office interest, West Kowloon will be mainly developed as a retail and leisure hub, according to the most recent development plans. It will probably remain an isolated office node that is unlikely to achieve a critical mass.

Trend 3: Shrinking Geography

Improvements to transport infrastructure further enhances the accessibility of various commercial districts, making relocation outside Central increasingly feasible. Other districts will also benefit from the shrinking geography, including the area surrounding the airport following the completion of the Hong Kong-Zhuhai-Macau Bridge.

Trend 4: New Technology and Management Theories

The rise of cloud computing and the practical reality of wireless power technology will change how office space is utilised, as well as the design of new buildings, pushing landlords to re-evaluate building life-cycles. Alternative locations that offer modern, high-specification buildings with larger floor plates, on top of lower rents, will lure tenants away from denser office locations.

 Trend 5: Shifting Attitudes in Tenure

A new ‘sandwich’ pattern of tenure has emerged, with large corporates and Chinese state-owned enterprises seeking office ownership, and small firms purchasing floors or single offices in strata buildings. The leasing market is positioned between each.

Chinese state-owned enterprises have always preferred owner-occupancy, but big corporates and Western banks are now also considering purchasing space. The new lease accounting regulations anticipated for 2017 will introduce fundamental changes to the decision criteria for leasing or buying a building. Against this backdrop, districts with diverse ownership and relatively vast land supply, such as Kowloon East, will become increasingly attractive to large occupiers.

Trend 6: Sustainability

The report forecasts a growth in the breadth and depth of the sustainability agenda. In response to increased competition, landlords may start passing energy savings onto occupiers in a bid to attract high quality tenants. Green offices are perceived to be more lettable and marketable due to the notable financial and Corporate Social Responsibility (CSR) benefits for the landlords.

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Note to editors: Please download the full ‘Hong Kong Office 2020’ report here. You can also review the complete ‘Offices 2020 Asia Pacific’ report here