Following is the speech by the Financial Secretary, Mr John C Tsang, at the Seminar on Office Development in Hong Kong organised by the Development Bureau at JW Marriott Hotel Hong Kong this morning (March 12):
Carrie (Mrs Carrie Lam, Secretary for Development), Distinguished Guests, Ladies and Gentlemen,
Thank you so much for joining this seminar on office development.
I know that Saturday mornings are extremely valuable time for all of us, so I really appreciate your giving up your precious Saturday morning to help us focus on this very important topic for Hong Kong.
Affordable, high-quality and well-connected office space is crucial to our competitiveness as an international business and financial centre.
Here at Pacific Place, we have a great example of what can be achieved through foresight and good planning.
From the MTR to this hotel and beyond, a network of walkways, escalators and elevators provide crucial connections to a plethora of shops, offices, restaurants and even a park.
The transformation of this part of town from the old Victoria Barracks into a dynamic office cluster clearly reflects Hong Kong's economic development. Between 1989 and 2009, the services sector's contribution to our GDP rose from under 75 per cent to about 93 per cent.
Today, Hong Kong is an international financial and business centre renowned for our world-class infrastructure, hard and soft, deep and broad pool of talents, transparent regulatory regime, high liquidity and superb efficiency.
Our city actually hosts over 6,500 overseas, Mainland and Taiwan companies representing their parent companies here in Hong Kong. These firms employ some 350,000 people.
We serve as regional headquarters or regional offices for more than 3,600 of these companies. This demonstrates clearly investor's preference in using Hong Kong as the base in Asia to oversee their regional operations.
Since reunification with the Mainland in 1997, Hong Kong's gateway role has continued to evolve. As a springboard for overseas companies entering Mainland markets, a regional perspective has to be adopted in defining the future positioning of Hong Kong. Some 82 per cent of the regional headquarters and offices in Hong Kong are responsible for businesses and operations in the Mainland.
The well-regulated markets in Hong Kong and our international connectivity also provide Mainland companies here with the know-how, the experience and the business model to go global.
Following the recent economic turmoil, the office space market has staged a strong rebound. Between early 2009 and January 2011, overall office rentals rose by 19 per cent, which is only 3 per cent below the recent peak in 2008.
The stock of office space rose from 9.1 million square metres at end-2000 to 10.7 million square metres at end-2010. In line with the progressive transformation of Hong Kong's economy towards higher value-added activities, 63 per cent of the stock is Grade A office space.
Office rentals in Hong Kong are relatively high compared with many other cities. This is a direct result of our city's strong competitiveness and good business potential. In this era of globalisation, high office rentals can only be sustained by strong competitiveness. In fact, Hong Kong was ranked the second most competitive economy in the world last year. Other cities with high office rentals, including London, Tokyo, Paris and so forth, are also among the most competitive cities.
Like many cities with an advanced, high value-added economy, Hong Kong has a well-established, dominant and efficient CBD accommodating premium business activities. We have excellent infrastructure and hardware including world-class airport and port facilities as well as a highly efficient and reliable public transport system.
However, our developable land mass is small. Planning for optimal use of our limited land resources to meet different and sometimes competing socio-economic needs has always been a challenging task.
The development of Hong Kong's CBD was closely related to the rocketing economy in the 1970s and 80s when we began to evolve from a manufacturing to a service-based economy. The CBD expanded into areas of Sheung Wan, Wan Chai and Causeway Bay and also across the harbour to Tsim Sha Tsui, and even to nearby areas in the New Territories.
The transformation of the predominantly industrial areas in Quarry Bay and Kowloon East to become office nodes is exemplary. In the process, the improved accessibility to these areas brought about by the MTR system has a key role to play. These new office nodes in the metro areas with a large stock of Grade A offices help absorb some of the demand for CBD Grade A offices. They also provide alternative choice of office at more affordable prices while regenerating dilapidated old urban areas.
In the past decade, the completion of Grade A offices in the CBD accounted for 18 per cent of the total new supply of Grade A stock. The corresponding figure for the office nodes in Quarry Bay and Kowloon East is 48 per cent. This highlights the trend of decentralisation of offices.
However, the new office nodes cannot replace the CBD. The CBD will continue to have strong appeal because of its prestigious status as well as agglomeration effect. The high office rentals and the popularity of the CBD, particularly Central, reflect the keen demand.
Nevertheless, it is Government's established policy to decentralise general office space as far as practicable.
We have completed a study on relocating government offices from the Wan Chai waterfront. The relocation of some 27 bureaux and departments will proceed in phases over the next few years. This will help provide Grade A offices for premium firms wanting to locate in our CBD.
Also, when the existing Central Government Offices are relocated to Tamar, hopefully beginning this year, the West Wing will be redeveloped into a public garden and a Grade A office tower.
We are also pursuing the development of other office nodes to satiate the huge appetite for premium offices.
Apart from Kowloon East and Quarry Bay, we have planned for considerable office development in West Kowloon as well as in Kai Tak.
The Wong Chuk Hang area which has many industrial buildings zoned for business use, also has great potential. This area will be even more attractive with the completion of the South Island Line (East) in 2015. The Secretary for Development will update you on the latest effort in revitalising industrial buildings, and the Director of Planning will elaborate on the planning for office nodes in his presentation.
Looking ahead, the demand for offices is expected to remain robust on the back of strong economic growth in Asia and particularly in the Mainland. A steady and adequate supply of quality office space at reasonable prices is crucial to maintaining our city's competitiveness.
Here are some of the questions that we have been asking ourselves. How far can we decentralise office development? Are office nodes in the New Territories viable? What are the major considerations of companies setting up in Hong Kong? Which industry sectors are best suited for offices outside the CBD? And, what more can the Government do to promote and facilitate office development in Hong Kong?
These are some of the issues we will be debating and addressing.
Ladies and Gentlemen, I appreciate very much this opportunity to discuss this very important subject with you today. We will make good use of your views and ideas on how best to develop Hong Kong's office space and maintain our competitiveness as a business and financial centre in Asia.
Have a great morning. Thank you very much.
Ends/Saturday, March 12, 2011
Issued at HKT 09:47
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Seminar on Office Development in Hong Kong