5 May 2015
The shortage of land for development is the main factor driving office prices high and making rents expensive in Hong Kong. To maintain the position as the financial hub in Asia, the government is spending a vast amount on infrastructure projects to boost the city’s economic growth in the years to come.
Joanne Lee, Senior Manager of Research and Advisory suggests that, “Offices with easy access to public transport fetch higher rents. For example, before the completion of the MTR Island Line, the premium for Grade A office rents in Central when compared with the neighbourhoods of Wan Chai and Causeway Bay averaged 56% in 1983 and 1984. With the MTR Island Line opened, the premium for annual rents for Grade A offices in Central narrowed to 45% in 1987 and 1988. Based on precedent, we can project a potential narrowing of 23 percentage points.”
Wendy Lau, Executive Director of Office Services foresees that, “The scheduled completion of the MTR South Island Line (East) at the end of 2016 will attract tenants to the neighbourhood of Wong Chuk Hang. It will therefore facilitate the redevelopment and revitalisation of the large number of industrial buildings in the area for office use.”
There are several redevelopment projects already under way in Wong Chuk Hang, but the area currently lacks a dominant developer capable of creating a coordinated and integrated array of business amenities. Wong Chuk Hang will be an interesting area for office development in Hong Kong driven by improving transport connectivity. The neighbourhood will become more attractive to corporate occupiers as the portfolio of offices, retail, hotels and serviced apartments improves.
Kowloon East is also under the spotlight. The development of Hong Kong’s new central business district (CBD2), including Kwun Tong, Kowloon Bay and Kai Tak, is part of an all-encompassing plan for the city that will expand its commercial landscape and provide a long-term solution to its current lack of space. Several government initiatives in Kowloon East, including the development of CBD2, industrial revitalisation, and an improved transportation network connecting the neighbourhood to the rest of the city, have encouraged both investors and occupiers to look into the opportunities in the district.
Fiona Ngan, General Manager of Kowloon Office Services says, “Kowloon East, traditionally a residential and industrial area, has undergone a major facelift in recent years, as a new decentralised office hub, will offer significant cost savings for occupiers. The transformation of Kowloon East into Hong Kong’s CBD2 is under way, between 2015 and 2017, a total of 2,868,784 sq ft of new office and 2,559,946 sq ft of revitalised office space will be available in market.The improved accessibility of Kowloon East will make relocation outside of Central more feasible.”
Colliers findings project that the improved transport connectivity between decentralised areas and the rest of Hong Kong will surely lead to higher rents in those areas, resulting in a narrowing rental gap between core and non-core districts.