New prime office supply set for Hong Kong over the next nine years won’t be enough to meet half of the forecast demand for space, according to a study by CBRE Group Inc. (CBG:US), the world’s biggest commercial realtor.
The city’s developers are planning to add about 8 million square feet of office space by 2020, CBRE said in a report with Daiwa Capital Markets. Hong Kong companies will need 17 million square feet of new space in the period, the report said.
Demand for financial and professional services from companies and individuals in other parts of China fueled an expansion by banks, law and accounting firms in Hong Kong since 2005. That, together with a shortage of new supply, has pushed the average office occupancy cost in the Central business district to the world’s highest, according to a separate report by Los Angeles-based CBRE.
“Vacancy rates look likely to remain very tight throughout the whole decade,” the report said. “Supply is inadequate not only in terms of quantity but quality.”
There’ll be no new buildings with a single landlord and floor area of more than 10,000 square feet -- features preferred by most large tenants -- being added to Hong Kong Island, where the Central business district is located, before 2017, CBRE said.
Hong Kong’s office occupancy cost was 11 percent higher than London’s West End, the world’s second-most expensive place to lease commercial space, at the end of the first quarter, even after having fallen 17 percent from a year earlier, CBRE said.
Sun Hung Kai Properties Ltd. (16), the world’s biggest developer by market value, is Hong Kong’s largest office landlord with almost 15 percent of total prime office space in the city, according to CBRE. It is followed by Swire Properties Ltd. (1972) with 10.6 percent, Hongkong Land Holdings Ltd. (HKL) with 6.5 percent, and Wharf Holdings Ltd. (4) with 6.5 percent, the report said.
Hong Kong companies have been moving offices away from the Central district to less expensive areas, with some financial services firms relocating their back offices to cut costs.
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