Hong Kong office space premiums are set to rise further as a result of international interest, according to a new report from Daiwa Capital Markets and property consultant CBRE.
Estimates suggest the region is likely to be 9m sq ft – or 207 acres – short of office space by 2020, assuming an annual growth rate of 4% in the business services sector.
Hong Kong has long been known for its restricted supply of residential property, however the latest estimates suggest the issue is becoming more pronounced within the office sector, with the lack of available space now registering an impact on the region’s economy.
Craig Shute, CBRE senior managing director for Hong Kong, Macau and Taiwan, told China Real Time Report: “We’re hitting a crisis point”.
Nick Axford, CBRE’s head of research for Asia-Pacific, added: “Right now, every occupier is saying, ‘If I don’t have to put someone into Hong Kong, I won’t’”.
To combat the effects of restricted office space supply, the government has announced plans to build ‘CBD2’ – a second central business district – in the disused industrial space of Kowloon East.
However, CBRE has said the district will take a significant period of time to redevelop, with concerns such as the relocation of existing industrial properties, the resolution of ownership rights and the installation of a comprehensive transport network among the hurdles to viability.
Current forecasts predict that the city is on track to produce 8m sq ft of office space by 2020, more than 50% shy of what CBRE estimates will be needed to meet the projected demand.
The commercial property and real estate adviser has recommended seven additional sites that could be fast-tracked through the development procedure in time for 2020, including 6m sq ft of government owned property in East and West Kowloon.
Speculation has been rife over the weekend surrounding non-locals being driven to commercial sector property as the result of a 15% increase in stamp duty on residential property transactions. However, analysts are sceptical of such an impact due to the money needed to invest in either form of Hong Kong property.
Wong Leung-sing, head of Centaline’s research division, expects Hong Kong’s world beating rental premiums to increase gradually in line with the regions reputation as an established corporate centre. He believes rents will not rise because of the increase in stamp duty, but instead because “supply is limited, and because economic activity is still in a good situation”.