Hong Kong’s Wild and Woolly Property Market
Although Hong Kong’s super-heated residential property market has cooled in recent months and shows no signs of ramping up again soon, the commercial market is still fairly hot and looks likely to remain so.
This is being driven by continued demand for new and additional premises, both from companies already here as well as those coming into the market. There is a very limited amount of new space in the pipeline, so most forecasters see a continued robust trend in prices, especially in core areas. Demand for rental premises seems reasonably well balanced from Hong Kong, mainland, and international companies.
There is clearly a restructuring of the market underway, with tremendous expansion into newly emerging higher quality areas in Kowloon East and other areas once considered remote or lower grade.
As usual, improved transport links have a tremendous impact on which districts are considered attractive, and in turn, sale and rental prices. The new MTR link into Hong Kong Island’s westside district of Saiwan, for example, is effectively causing big changes in the composition and demographics of adjacent neighborhoods; and the soon-to-be-completed Central to North Point road link is slated to reduce average driving time between those districts dramatically, to about five minutes.
Amidst all this to-ing and fro-ing, our office landlord gave all tenants in the building six months’ notice to vacate, due to their plan to redevelop the premises into a high-end apartment block. This is the second time in roughly ten years that the same fate has befallen us. Last time it was redevelopment of an office block into a hotel.
In both instances, standard commercial leases in Hong Kong give the landlord the right to terminate tenancy agreements with six months’ notice, without compensation. Not much fun for tenants, but this is the law of the property jungle in Hong Kong.
In Hong Kong’s heady property market, you get used to stuff like this, just as you get used to your lovely sea view, for which you paid a premium, being blocked by a new building(s) erected just in front of it, sometimes on land reclaimed from the harbor.
Faced with six months’ notice, we switched into high gear and began collecting data about premises in various buildings in selected districts we were considering for our relocation.
As part of the process, we assembled a map showing which districts our locally based staff currently live in, to help guide us in selecting the location of our new office. It’s impossible to please everyone, but the effort to choose the best possible location is generally appreciated by all staff.
After some winnowing, sorting, and short-listing, first of districts, and then of buildings, it was time to start inspecting potential new premises.
Our goal was to look at premises in a variety of buildings in various neighborhoods on the north side of Hong Kong Island, between Sai Wan and Quarry Bay. In each case, that involved a brief meeting with the landlord or their representative, followed by a tour of the premises, inspection of the facilities, etc.
Our first meeting and building tour was at 9:30 am. We concluded the last inspection of the day at 5:30 pm. All in all, we visited and inspected 14 buildings.
That’s no big deal, unless you stop and ask yourself if it’s possible to complete 14 initial premises inspections in a variety of neighborhoods within an 8-hour period (including a one hour lunch break) in any other city around the world other than Hong Kong.
I would maintain the answer is: no way.
It’s no wonder you meet a lot of people who, once they get used to Hong Kong’s level of efficiency, find that most other cities lag far behind.