Hong Kong’s high marks for high costs
As one of Asia’s most prominent business hubs, Hong Kong tops many regional and global lists pertinent to the real estate industry.
Hong Kong remains the second most expensive place to live in the world, behind Singapore, according to the Economist Intelligence Unit’s Worldwide Cost of Living 2017 survey released in March.
And those living in Hong Kong work in the most expensive office market in the world, with prime office rents in Hong Kong (Central) fetching $264 per square foot per year, and Hong Kong’s West Kowloon in third place with $163 per square foot per year, states CBRE Group’s latest Global Prime Office Rents survey.
“Prime rent growth in Asia Pacific averaged 1.8 percent and was strongest in gateway cities,” notes CBRE’s report. “Hong Kong [West Kowloon] led the way at 9.3 percent due to strong demand from Chinese companies for premium locations and very tight supply conditions.”
Further affecting supply conditions is Hong Kong’s limited buildable space. The city-state represents the region’s most expensive place to build, with construction costs averaging $324.38 per square foot, ranking fourth in the world behind New York City ($354.05), San Francisco ($330.05) and Zurich ($328.10), according to Turner & Townsend’s International Construction Market Survey 2017, released May 16.
“Construction costs in Hong Kong are set to rise by 5 percent in 2017, as major infrastructure investment pushes up demand for resources and labor,” with 3.5 percent construction price inflation expected globally during the next 12 months, Turner & Townsend note in a statement about the survey.
The firm considers Hong Kong a “warm” market — in the middle of the spectrum from “cold” to “overheated” — meaning there is decreased competition among contractors for work, leading to higher construction cost inflation. This is particularly evident in “hot” and “overheated” markets, with Turner & Townsend’s future market outlook for Hong Kong indicating it is on the way to becoming “hot” during this year.