We definitely suggest HWL develop the new Building and we are going to present four main reasons why. First, due to the demand rate growth, second, the change the economy structure, third, the increasing demand for high profile offices for foreign companies and on the estimates published by the Hong Kong Rating and Valuation Department. We will elaborate on our assessment in the subsequent paragraphs of this memo.
Between 1988 and 1992, the demand for office space in Hong Kong had grown substantially, increasing annually at an average rate of 4 – 5% (detailed computations of Hong Kong’s GDP and Employment statistics in Annex A). Three major factors have led to the rapid growth in demand. Firstly, Hong Kong’s economy has expanded by an average year-on-year growth of 17.6% in nominal terms and by an annual average of 7.6% in real terms since 1971. Based on our linear extrapolation and inflationary adjustments, we expect Hong Kong’s real GDP to grow at an average rate of 4.1% from 1993 to 1999 (details in Annex A1). Given the GDP growth outlook, the demand for office space is expected to remain buoyant since the two are positively correlated.
The second factor fuelling demand for office space in Hong Kong is the transformation of Hong Kong’s economic structure. Since the late 1970s, Hong Kong’s economy has shifted from an industrial-based to service-based economy. Employment in the Services sector has grown at an average rate of 5.44% for the period 1988 to 1993. Consequently, there is an increasing demand for office space. Using the current office space norm of 10 m2 per new staff and assuming that employment in the Services sector continues to grow by the historical average of 5.44%, a total of 1.3 million m2 of new office floor space will be required in 1999 (details in Annex A2).
The third factor that drives demand for office space is the growth in foreign companies in Hong Kong. The country continues to be very attractive to foreign companies...