Hong Kong Office
www.cbre.com.hk
Quick Stats
Changes from
Q3 10 Q4 09
Absorption  
Vacancy Rate  
Rental Value  
Yields  
Supply  
Quarter at a Glance
Both net absorption and rental
growth slowed in the fourth quarter,
which may be a reflection of
seasonal factors, the lower overall
availablity of space for lease, as
well as some tenant resistance
to the level of rents being asked
for certain buildings in core office
districts.
Fourth Quarter 2010
OVERVIEW
 Hong Kong’s economy expanded 6.8% y-o-y in the third quarter, which marks the
fourth consecutive quarter of positive economic growth since the end of 2009. This
can largely be attributed to the continued strength of China’s economy, which helped
Hong Kong to weather the impact of the global financial crisis. An optimistic regional
economic outlook has also attracted foreign firms to establish local operations, as
well as bring in overseas talent.
 Positive net absorption of 3.1 million sf for the whole of Hong Kong was recorded
in 2010. While some of the absorption reflects the physical take-up of space in new
buildings such as ICC that was pre-leased earlier, it also reflects companies opening
new offices in Hong Kong, particularly those in the legal and finance sectors taking up
offices in the Central district, as well as companies already in Hong Kong expanding
their operations to capitalize on growth in the region.
 Vacancy across Hong Kong fell 3.3 percentage points y-o-y to average 5.6% in
December. Vacancy in the Central business district dropped almost 2 percentage
points y-o-y to average 3.1%, while vacancy in the prime A1 buildings remained
below 1%. Meanwhile the vacancy rate fell 5.8 percentage points in Causeway Bay
due to strong take-up, while vacancy in Kowloon East ended 10 percentage points
lower as companies took up space in newly completed buildings.
 Rents have risen as a result of the positive tenant demand amidst limited new supply.
Office rents for Hong Kong overall increased 34.7% in 2010 to average $53.4 psf in
December. Average rents in the Central district increased 40.2% to average $111.1
psf, while Central A1 rents increased 49.5% to average $147.9 psf. Rental growth
of around 43% y-o-y was recorded both in Causeway Bay and Kowloon East, due
to the strength of demand for available space in both districts over the year.
 New supply will total around 1.3 million sf in 2011, compared to a historical average
of around 2 million sf per annum from1995 to 2010. However institutional grade
supply will remain limited in 2011, therefore rents will continue to find support for
further growth as occupier demand is expected to remain positive over the coming
12 months.
GDP growth rate (y-o-y) [In chained (2007) dollars] (%)
GDP & Net Absorption Net Absorption
GDP Growth % (y-o-y) Millions SF Net
10% 5,000,000
8% 4,000,000
6% 3,000,000
4% 2,000,000
2% 1,000,000
0 0
-2% -1,000,000
-4% -2,000,000
-6% -3,000,000
-8% -4,000,000
-10% -5,000,000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010*
* 2010 year end GDP growth is HKSAR government estimate
© 2011, CB Richard Ellis, Inc.
 HONG KONG ISLAND Floor Space Leased by Sector on
Hong Kong Island (Q4 2010)
Headlines Community, social and personal services
4% 2%
 Absorption slowed in Q4 to total 33,000 sf, 0.3% 1% Finance and banking
1%
compared to 500,000 sf in Q3 Information and communications
 Causeway Bay vacancy down 1.3 percentage Insurance activities
40%
points to average 3.8% Manufacturing
Hong Kong Office

24%
Professional, administrative & business services activities
 Average rents increased 6.6% q-o-q; strongest
Real estate activities
rental growth in Causeway Bay at 16% q-o-q Transportation, storage, postal and courier services
to average $48 psf 3%
Wholesale, retail and import/export trades, restaurant
and hotels
11%
Others
14%
Sustained economic growth in 2010 helped to
provide support for the almost 1 million sf of
positive net absorption witnessed on Hong Kong Hong Kong Island Rental Index
Island this year, which is in stark contrast to the Rental Index (2000 Q1=100)
more than 725,000 sf of negative net absorption 400
recorded in 2009 as companies downsized 350
operations following on the global financial crisis.
300

250
Absorption slowed in the fourth quarter to total
around 33,000 sf, compared to around 500,000 200

sf of positive net absorption recorded in the third 150

quarter. The slowdown may be due to the reduced 100
vacancy of space across Hong Kong Island, 50
averaging 3.9% in December. Central vacancy
0
remained limited throughout the year due to Q2 00
Q4 00
Q2 01
Q4 01
Q2 02
Q4 02
Q2 03
Q4 03
Q2 04
Q4 04
Q2 05
Q4 05
Q2 06
Q4 06
Q2 07
Q4 07
Q2 08
Q4 08
Q2 09
Q4 09
Q2 10
Q4 10
strong demand from new start ups in the legal and Hong Kong Island Central Central A1
financial sectors; meanwhile vacancy in Causeway
Bay was down 1.3 percentage points over the Hong Kong Island Supply Pipeline
quarter to average 3.8%. Tenants such as Neoderm
Percentage of Stock
and L’Occitane took up space over multiple floors
35%
in Times Square, which helped to draw down
overall vacancy levels in the district. 30%

25%
The reduction in absorption may also be a
20%
reflection of the beginnings of tenant resistance to
the higher rentals being asked by landlords as a 15%

result of the strong leasing activity witnessed over 10%

the past year. Rents on Hong Kong Island increased
5%
35% y-o-y in December to average $70.5 psf,
compared to a decline of around 19% recorded 0%
Central Admiralty Sheung Wan Wan Chai Causeway Hong Kong
in 2009. Central rents increased 5.9% q-o-q to Bay East
average $111.1 psf, however this is lower than Vacancy Rate Development Pipeline to end 2012

the 11% increase recorded in the third quarter.

Causeway Bay rents however jumped 16% q-o-q Hong Kong Island Vacancy Rate
to average $47.8 psf, which is almost double the Vacancy Rate (%)
rate of increase in the third quarter, and may be a 50
reflection of landlord confidence to raise rents given 45

the drop in vacancy over the past year. 40

35
30
New no supply was completed over the quarter,
25
while Kerry Centre in HK East was the only new
20
office building to be completed on Hong Kong 15
Island this year. Pipeline supply for 2011 is forecast 10
at around 366,000 sf in net floor area, with the 5
completion of several new buildings in Central, 0
Fourth Quarter 2010

namely 50 Connaught Road, LHT Tower and 39

Q2 00
Q4 00
Q2 01
Q4 01
Q2 02
Q4 02
Q2 03
Q4 03
Q2 04
Q4 04
Q2 05
Q4 05
Q2 06
Q4 06
Q2 07
Q4 07
Q2 08
Q4 08
Q2 09
Q4 09
Q2 10
Q4 10

Queen’s Road Central. Hong Kong Island Central Central A1

Page 2
© 2011, CB Richard Ellis, Inc.
 Floor Space Leased by Sector in KOWLOON
Kowloon (Q4 2010)
10% Community, social and personal services
Headlines
9%
Construction  Quarterly absorption slowed to total
7%
Finance and banking 177,000 sf, compared to 504,000 sf in Q3
4%
Information and communications  Kowloon East vacancy averaged 11.3%
Insurance activities  Quarterly rents up 6.4% in TST, 6.6% in

Hong Kong Office

11%
Manufacturing
32% Kowloon East
Professional, administrative & business services activities
Real estate activities
11% Transportation, storage, postal and courier services A record amount of net absorption took place in
8% 7% Wholesale, retail and import/export trades, restaurant
and hotels
Kowloon this year, totaling 2.1 million sf. Around
1% 0.4%
Others 1.1 million sf of positive absorption took place
in Kowloon East, where new offices completed in
Kowloon Rental Index recent years continued to attract the majority of
occupier demand. The rate of absorption slowed
Rental Index (2000 Q1=100)
in the fourth quarter however to total only 46,000
180
sf, compared to absorption of 302,000 sf in the
160
third quarter. Shell, with its offices in Causeway Bay,
140
committed to almost 30,000 sf in Landmark East.
120
Meanwhile the rate of absorption in Tsim Sha Tsui
100 also slowed in the fourth quarter to total 34,000 sf,
80 compared to 193,000 sf of positive net absorption
60 in the third quarter.
40
20 Rental growth in Tsim Sha Tsui initially lagged
0 behind other districts during 1H 2010 as companies
Q2 00
Q4 00
Q2 01
Q4 01
Q2 02
Q4 02
Q2 03
Q4 03
Q2 04
Q4 04
Q2 05
Q4 05
Q2 06
Q4 06
Q2 07
Q4 07
Q2 08
Q4 08
Q2 09
Q4 09
Q2 10
Q4 10

expanded on Hong Kong Island, or took up space

Kowloon Tsim Sha Tsui Kowloon East in Kowloon East. However the rate of increase
started to pick up by the third quarter this year on
Kowloon Supply Pipeline the back of stronger demand for relatively more
Percentage of Stock cost effective office space in the district. District
35% rents increased 6.4% q-o-q to average $39.4 psf,
while rents in Kowloon East increased a similar
30%
percentage to average $22.7 psf in December.
25%

20% Landlords in the Kowloon East area were more

confident about raising rents, as the average
15%
vacancy rate for grade A offices in the area fell
10% 10 percentage points y-o-y to average 11.3% in
5% December, which is significantly lower compared to
the third quarter of 2008 when vacancy averaged
0%
Tsim Sha Tsui Kowloon East Kwai Chung & Tsuen Wan 35%. With contiguous floors in larger floor plate
Vacancy Rate Development Pipeline to end 2012 buildings becoming scarce, occupiers requiring this
type of space in the coming year will need to be
Kowloon Vacancy Rate more strategic in trying to acquire it.
Vacancy Rate (%)
New supply totaled 757,000 sf in net floor area
50
45
in 2010, largely due to the completion of ICC
40
Phase 3 and Legend Tower earlier in the year.
35 Pipeline supply will fall to total around 900,000 sf
30 in net floor area in 2011, with the majority of the
25 space to be completed in Kowloon East. Of this
20 new supply, Sinoland’s 18 Kowloon East, totaling
15 around 262,000 sf in net floor area, is expected to
10 be completed in the first quarter, as well as Billion
5 Development’s next project, 133 Hoi Bun Road,
0 which totals around 416,000 sf in net floor area.
Fourth Quarter 2010
Q2 00
Q4 00
Q2 01
Q4 01
Q2 02
Q4 02
Q2 03
Q4 03
Q2 04
Q4 04
Q2 05
Q4 05
Q2 06
Q4 06
Q2 07
Q4 07
Q2 08
Q4 08
Q2 09
Q4 09
Q2 10
Q4 10

Kowloon Tsim Sha Tsui Kowloon East

Page 3
© 2011, CB Richard Ellis, Inc.
 Hong Kong Office
Selected Leasing Transactions in Q4 2010

District Property Size (sf) Tenant TERMINOLOGY

Sheung Wan Vicwood Plaza 24,000 Hetermedia
Grade A:
Central Jardine House 14,000 SEB
Modern facility with high quality finishes; flexible
Wanchai Central Plaza 18,000 Clyde & Co layout; large floor plates; spacious lobbies and
Kowloon East Landmark East 29,000 Shell circulation areas; effective central air-conditioning;
good lift services zoned for passengers and goods
deliveries; good management and parking facilities
Selected Office Supply are normally available.

Expected date of New Supply:

Project
Location Size (sf) Completion The number and/or square footage of buildings
completed (including redevelopment) in net floor
50 Connaught Road Central 50 Connaught Road Central 130,000 Q1 2011 area in a period.
LHT Tower 31 Queen’s Road Central & 126,000 Q2 2011 Net Absorption:
1-7 Theatre Lane, Central The figures are arrived at by adding the completions
39 Queen’s Road 39 Queen’s Road Central & 110,000 Q3 2011 in that period to the vacancy figures at the beginning
Central 19-28 Li Yuen Street East, of the period, then subtracting the period’s
Central demolition and the year end vacancy figures.

One Island South 2 Heung Yip Road 578,000 Q1 2011 Vacancy Rate:
The amount of vacant space divided by the total
133 Hoi Bun Road 133 Hoi Bun Road, Kwun Tong 416,000 Q1 2011 stock.
18 Kowloon East 18 Wang Chiu Road, Kowloon Bay 262,000 Q1 2011 Rent:
Monthly rents are presented in HK$ on a net
effective basis, unless otherwise specified.
CBRE Rental Index Growth
Capital Value:
District Q-on-Q Y-on-Y Rent (HK$ psf) Capital values are presented in HK$ on a gross basis,
Central 5.8% 40.2% 111.1 unless otherwise specified.
Sheung Wan 3.4% 21.6% 53.6
Admiralty 4.2% 25.9% 69.3
Wan Chai 5.2% 29.5% 48.8
Causeway Bay 16% 43.2% 47.8
North Point 8.2% 18.6% 26.9
Hong Kong East 15% 31% 38.8
For more information regarding the
Tsim Sha Tsui 6.4% 32% 39.4
MarketView, please contact:
Kowloon East 6.6% 43.2% 22.7
CBRE Research:
Major Office Districts in Hong Kong Benedict Ma
T. 852. 2820 2806
MTR System E. benedict.ma@cbre.com.hk
Kwun Tong Line
Office Services:
Tsuen Wan Line Rhodri James
T. 852. 2820 2883
Island Line E. rhodri.james@cbre.com.hk
Airport Express
CB Richard Ellis
Tseung Kwan O Line Hong Kong Office
4/F Three Exchange Square, 8 Connaught Place
Central, Hong Kong
T. 852. 2820 2800 F. 852. 2810 0830

© 2011 CB Richard Ellis, Inc. We obtained the information above from sources we believe to Kowloon Office
be reliable. However, we have not verified its accuracy and make no guarantee, warranty or
representation about it. It is submitted subject to the possibility of errors, omissions, change
Suites 1201-3 & 14, 12/F, Tower 6,
of price, rental or other conditions, prior sale, lease or financing, or withdrawal without notice. The Gateway, 9 Canton Road, Tsimshatsui,
We include projections, opinions, assumptions or estimates for example only, and they may not
represent current or future performance of the property. You and your tax and legal advisors
Kowloon, Hong Kong
should conduct your own investigation of the property and transaction. T. 852. 2820 8100 F. 852. 2521 9517