Hong Kong must build more new offices to benefit from the Greater Bay Area initiative

[Sponsored article]

The Greater Bay Area (GBA) is projected to become one of the largest regional economies in the world. Under the government’s plans, the mainland Chinese cities within the GBA will refocus on technology, innovation, research & development, and advanced manufacturing as they strive to transform their economies up the value chain.

As industries within the GBA grow, this will translate into a greater need for financial and business services; expertise that Hong Kong companies have in spades. Hong Kong’s established position as an entrepot between the east and west will allow it to assume the role as a ‘super connector’ between the GBA and the rest of the world. Hong Kong is also set to become an important office location for mainland Chinese companies looking to go global.

Yet for Hong Kong to be able to capture this increased demand for financial and business services, it must first ensure that it has an adequate land supply to deliver affordable housing and high-quality commercial office floor space. Much more than it currently has now.

Hong Kong’s property market has historically been supply constrained. As a result, property prices in the city can endure bouts of extreme highs, such as the situation we find ourselves in now. At more than 18x the median household income, housing affordability ranks amongst the worst in the world. High housing costs are essentially a hidden tax for the city’s residents, and reduce the city’s overall attractiveness and competitiveness.

But it’s not just the housing market that has to contend with these uncomfortable highs. Similar issues also plague the office market. Newly built offices usually lease out very quickly, often reaching full occupancy within a year of completion. As a result, the office market is prone to acute supply-demand imbalances, leading to tight vacancy situations and rapid price and rental escalation.