Tom Gaffney has spent nearly a decade in retail leasing, after launching his real-estate career in 2001. During his 15 years in the industry he has accomplished much, including bringing various international brands to Hong Kong including the Jamie’s Italian restaurant chain, owned by the celebrated British TV chef Jamie Oliver. He also helped US high-fashion retailer Forever 21 open its second new concept store here, in Mong Kok, and identified various locations for causal wear retailer, American Eagle. Early this year, he joined CBRE as managing director for Hong Kong, Macau and Taiwan with responsibility for all the firm’s business activities in those territories. Before joining CBRE Gaffney was head of retail, Hong Kong and China at JLL. From 2006 to 2011, he worked for Hongkong Land, responsible the firm’s luxury retail portfolio of about 350,000 square feet before his departure. Hong Kong’s property market is entering a correction, with retail rents falling and slower demand for office space, amid a bleak overall economic outlook. Do you think it is one of the most difficult times ever for the real estate industry? I don’t think it is difficult, but the months ahead will be most exciting. A turbulent market creates lots of opportunities for companies like CBRE. More corporates are trying to relocate people to cheaper locations and looking for more cost-effective operations. The market will also allow people to enter the property market at a slightly cheaper level than previously, and investors to cash in on gains. Hong Kong’s retail market is heading for a severe downturn; when do you expect the sector to hit bottom? As the current difficulties in the Hong Kong retail market are structural in nature, we do not see any chance of the market rebounding soon. From a rental perspective, it may take at least another 12 months before rents hit the trough. The retail market has been running on a downward trend for two to three years, due to reduced demand for luxury consumer goods and a gradual slowdown in the mainland economy causing more prudent spending patterns by mainland tourists. What about the office market’s outlook? Office demand has also softened, with multinational companies (MNCs) becoming more cautious in planning their space requirements. A lot of MNC’s activities are cost-driven. Demand from mainland firms continues to dominate the leasing market in Central. These Chinese firms are also very active in the office sales market, looking for buying opportunities. Overall office-leasing demand will remain soft until the Chinese and global economies show solid signs of recovery. There will be a relative rebound in new supply in the next two to three years and therefore rents will start entering a downward cycle from 2017 onwards. It will not be a big crash, as overall vacancy levels in Hong Kong are still very low. Even with more supply in the pipeline, vacancies will likely remain at single-digit levels. Depending on location, rents may come down 20-30 per cent during this period. Bank of East Asia announced it was laying off 180 staff early this month, sounding alarm bells about a worsening business operating environment. Do you think local firms may surrender more space in coming months? Yes, there is a chance. If the economic outlook turns sour, there may well be more staff redundancies. Some may choose to occupy less space, but some may opt to keep a similar footprint but relocate to less expensive areas, especially when there will be more affordable options coming up in areas like Kowloon East from 2017 onwards. The market will have more options for cost-sensitive occupiers compared with a few years back. CBRE said in April that mainland firms from second-tier cities will become a key source of demand for office space in Central. Landlords will ask for higher rents and longer deposits to minimise risk. Do you think the mainland’s L-shaped economic growth pattern will slow demand for office space in the city? In the medium-to-long run, underlying demand for office space in Hong Kong from mainland firms remains strong as only 10 per cent of licensed banks and 25 per cent of licensed securities firms in the mainland have offices here. There will be huge demand for those wanting to establish a presence here. With capital outflow continuing to be such a major theme, and as more corporates reach a certain scale locally in the mainland, there will be more Chinese entities looking for outbound investment and Hong Kong remains a natural stop for them. There will be more Chinese entities looking for outbound investment and Hong Kong remains a natural stop for them Can you tell us the story of how you got Jamie Oliver’s restaurant chain to come to Hong Kong? It was a process that took nearly three years from inception to the opening of the restaurant in Causeway Bay. My team and I at the time worked closely with Will Lyon, the chief executive officer of The Big Cat Group, the Hong Kong partner of Jamie’s Italian, to devise a strategy on where their first Hong Kong restaurant would be best placed. We needed to analyse financially what and where would make the most sense for them to open, the type of property they should target, look at the demographics of the districts and from those work out what was the most suitable price point for their product. Then we finally sourced some opportunities. Lyon wanted to be in a prime location that had a diverse range of consumers from families, to office workers, to local diners to tourists. We felt Causeway Bay ticked all those boxes best. Will wanted at least 5,000 net square feet and to have a building with high ceilings, to give the feeling of spaciousness, akin to some of the other Jamie’s Italians around the world. In the end , they took 11,000 square feet at Soundwill Holdings’ Midtown in Causeway Bay. Shortly after, following on from the great success of its first store, the company opened its second store in Harbour City, Tsim Sha Tsui. Again the same strategies and criteria as above applied, and a second Jamie’s was borne, which has proved a wonderful success. None of this would have been possible without the amazing work of my team and a very strong relationship with Lyon.