 |
HONG KONG, Oct. 6, 2011 /PRNewswire-Asia/ -- The Royal Institution of Chartered Surveyors ("RICS") has commissioned CB Richard Ellis (CBRE) to carry out a survey on the office buildings in the existing Central Business District (CBD) with objectives to assess current demand for office space and forecasting future demand. Industry, stakeholders and occupiers were interviewed to assess their needs. Case studies of three other cities that have created alternative CBDs or decentralized hubs have also been provided. The report is submitted to HKSAR Government today. It reflects a serious shortage in Grade A office buildings which is detrimental to Hong Kong's competitiveness.
The report also shows that the finance and insurance, real estate and business services (FIRE) industries actively opt to remain in areas which attract the highest rent, despite being able to attract rental discounts of between 55 - 79% outside of the CBD. The reason for this can be attributed to multiple factors: corporate image, transportation network and proximity to clients, and the fact that office buildings in CBD could provide larger space, especially Grade A buildings.
The study points out that between the period of 1995 and 2011 Q2, the supply of Grade A office buildings in Hong Kong was affected by 3 major crises. Level of vacant Grade A office buildings rose high due to the hit of the financial crisis in 1997, followed by the burst of technology websites bubbles and then the outbreak of SARS. Later, the vacancy dropped from the reviving economy. Figures show that the vacancy in Grade A office buildings are declining in each wave of rebound.
According to the study, supply for office space is forecasted at about 5.25 million from 2011 to 2014 is sf., which is about 1.3 million sf. per year, representing substantial decline in supply when compared to the annual 1.9 million sf. between 1995 and 2011. The study reveals that even in the worst case scenario, where annual GDP growth falls by 5%, demand for office space is still equal to forecast pipeline supply through to the end of 2014. The underlying strength of the Hong Kong economy, however, suggests that there will be a further fall in vacancy rates in the very near term. Respondents believed multinationals will be deterred from entering or expanding in Hong Kong because of the shortage in office space.
RICS has addressed its suggestion to the Chief Executive's Office to tackle the office space shortage in Hong Kong. Suggestions are as follows:
1) Strategic Planning
RICS advocates the need for an overarching strategy that takes into account every aspect of the economy, land use and planning that cuts across residential, commercial, urban renewal and harbourfront development. This approach can facilitate the creation of mixed-use developments, complemented by an efficient transport system and green spaces. RICS supports the Government's aims to protect the ridgelines of Hong Kong and its harbour view. However, height restrictions, particularly for buildings near transportation hubs, should be considered on an individual basis, given the importance of transport connectivity for occupiers.
2) Increasing sites in Central
RICS thinks a steady supply in Grade A office building sites in CBD is crucial in solving the shortage issue to address the demand from local and international business institutions. RICS suggests adopting new approaches to fully utilize the site without compromising green spaces and public facilities.
3) Increasing Supply of Sites
RICS suggests the Government to encourage landlords to release sites and aggregate adjacent sites, facilitating the construction of buildings with larger floor plates. Government must adopt a more proactive role in engaging with landlords and developers. "Pencil" buildings in Central are often not fit for purpose, particularly for larger international corporate occupiers. The Government could also speed up the regulatory approval process; streamline the building plan approval process as well as easing land lease restriction. RICS is able and willing to work with the Government and speed up the planning approval process.
4) Non CBD Area
Most financial institutions in Hong Kong have relocated middle and back office functions to decentralized locations, for example in North Point, Quarry Bay and Kwun Tong. In order to have a successful decentralized hub, the following conditions are require, including facilities and transport hub, well established decentralized office nodes which cater to the information and communications industry or wholesale, retail and import/export trades. Businesses can be motivated to relocate if there is a significant reduction in operational and occupancy cost - particularly to areas where there is already an attractive commercial environment.
5) Office Buildings Market Trend
Despite evidence that suggests green buildings have the ability to attract higher rent, sustainability is currently not a key consideration for landlords and tenants in Hong Kong. RICS thinks that sustainable buildings are not any more expensive to build from the outset than conventional ones, but their ownership can result in clear benefits for investors, ranging from drastically lower operating costs, significantly increased occupant productivity and more stable cash-flows. Government should play a more active role in promoting sustainability. This can be through increased investment in skills and knowledge, investing in fiscal incentives and commissioning research to create sound empirical proof of the increased value of sustainable.
Mr David Faulkner, Chairman, RICS Hong Kong Working Group on the Grade A Office Study, said, "RICS recognizes that without an adequate supply of high quality office buildings suited to the modern occupier's needs, Hong Kong will become uncompetitive as a location for regional or global headquarters for the services industries. This in turn will reduce its attractiveness as a financial centre with potential loss of jobs not only in the core industries, but also many of those that support the financial sector. At the same time Hong Kong's heritage and open spaces must be protected, which will require innovative ways of developing properties in the future. Whilst decentralized hubs will go some way to alleviate the shortage of space, there is still strong demand for central locations and new supply needs to find a balance between the two locations."
About RICS & RICS Asia
RICS is the world's leading qualification when it comes to professional standards in land, property and construction.
In a world where more and more people, governments, banks and commercial organisations demand greater certainty of professional standards and ethics, attaining RICS status is the recognised mark of property professionalism.
Over 100,000 property professionals working in the major established and emerging economies of the world have already recognised the importance of securing RICS status by becoming members.
RICS is an independent professional body originally established in the UK by Royal Charter. Since 1868, RICS has been committed to setting and upholding the highest standards of excellence and integrity - providing impartial, authoritative advice on key issues affecting businesses and society. RICS is a regulator of both its individual members and firms enabling it to maintain the highest standards and providing the basis for unparalleled client confidence in the sector.
The RICS Asia supports a network of over 11,000 individual professionals across the Asia Pacific region with an objective to help develop the property and construction markets in these countries, by introducing professional standards, best practice and international experience. It promotes RICS and its members as the natural advisors on all property matters. It also ensures that services and career development opportunities are provided to members.
The RICS Asia region covers national associations and local groups locating in Brunei, Malaysia, Singapore, Thailand, The People's Republic of China and the SAR Hong Kong. It also has members working across the region such as Bangladesh, Bhutan, Burma/Myanmar, Cambodia, Indonesia, Japan, Kiribati, Laos PDR, Macao, Mongolia, Nepal, North Korea, South Korea, Taiwan, The Maldives, The Philippines, Timor East and Vietnam. For more information, please visit: www.ricsasia.org.
Media enquiry, please contact:
RICS Asia Public Relations Representative
Mr. Andy Hung / Ms Polly Tsang
Tel: +852-2372-0090
Fax: +852-2372-0490
Mobile: +852-9254-9250 / +852-6108-5435
Email: andy@creativegp.com / polly@creativegp.com
