International Property

Hong Kong’s appeal as tech hub hammered by spiralling office rents and high salaries

City comes 8th in a 16-strong league table compiled by Colliers, ranking Asia’s best tech locations. Bangalore, Singapore, then Shenzhen given top billing

PUBLISHED : Thursday, 20 September, 2018, 7:30am
UPDATED : Thursday, 20 September, 2018, 6:28pm

Hong Kong’s spiralling office rents and high salary costs compared with its main rivals are hurting the city’s appeal as a technology centre, according to a new survey by consultancy Colliers International.

The report, compiled by a team led by Colliers’ executive director of research for Asia Andrew Haskins, weighs up socio-economic, property and human factors to determine the viability of 16 cities across the region as tech hubs.

Hong Kong now trails in eighth, behind, in order, Bangalore, Singapore, Shenzhen, Beijing, Shanghai, Seoul and Hyderabad.

Its average prime office rent is listed as HK$76.5 (US$9.75) per square foot, the highest in the list, and more than five times more expensive than top pick Bangalore, at HK$14 per square foot.

“In terms of property cost, Hong Kong scores poorly, [especially in its Central business district] as the world’s costliest rented-office location. Employer costs are also high,” said Colliers

“Hong Kong’s low scores on these measures outweigh better scores on various metrics such as availability of flexible workspace and innovation.”

However, Colliers believe Hong Kong’s position as a technology centre has the potential to improve sharply as the city’s proximity to South China. Leading technology groups and social media groups such as Facebook has expanded rapidly in Hong Kong.

In separate recent report, Oliver Rigg, head of advisory and transaction services at CBRE, said he expected rental growth in Hong Kong to continue under “sustainable leasing demand and limited vacancy”.

In terms of property cost, Hong Kong scores poorly
Andrew Haskin, Colliers’ executive director of research for Asia

“Rents in Central are forecast to set a new high by the end of this year, rising by a further 5 per cent in the second half,” he added.

And Alex Barnes, head of markets at JLL, reported recently he expected Hong Kong to lose its competitive edge as a result.

“The barrier to entry for companies looking to enter or grow specific parts of their business, particularly technology research and development, will be [increased], in part, by high rent and little office space availability compared to alternatives.

“Clearly Hong Kong is a long way behind Singapore in its volume of technology industry by size and nature,” said Barnes.

No hope in sight for Hong Kong’s soaring office rents, experts say

“We cannot catch up on volume of business growth, but we should at least be in the game for the sake of Hong Kong’s future as a leading world city.”

Bangalore, dubbed the Silicon Valley of India, topped the Colliers league, with a score of 68 per cent, which it attributed to its low staff costs and office rent, and a deep talent pool.

“The city is set to be the fastest-growing city in Asia over the next five to 10 years,” Haskins said. “Bangalore ranks as the second largest urban office market in Asia.”

Crypto firm takes floor at Li Ka-shing tower for record US$600,000 a month

The booming tech hub is listed as having 141 million square feet of grade A office stock, ample space to house the operations of a growing population of tech firms from around the world.

Singapore ranks second overall, based on strong ratings for safety, quality of living and relatively little air pollution. Facebook recently chose Singapore as the location for its first data centre in Asia, which is due to start operations in 2022.

Ranked third, Shenzhen’s expected new office supply in coming years gives it an advantage over Hong Kong, the study suggested.

“Shenzhen has [also] overtaken Hong Kong by GDP and should benefit over time from closer integration of the Greater Bay Area,” it said.