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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
2. Evolution of new office hotspots, including
Hong Kong East, Kowloon East, Wanchai/Causeway Bay and West Kowloon;
3. Completion of new public transport
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.
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
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
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.
– End –
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