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News from Knight Frank Hong Kong

Knight Frank launches Asia Pacific Office Occupier Survey 2015

18 August 2015

Knight Frank today releases its 2015 Asia Pacific Office Occupier Survey undertaken by more than 270 companies located in Asia Pacific spanning across eight industries.

Ross Criddle, Head of Global Corporate Services, Knight Frank Asia Pacific, says, “The survey results provide an invaluable insight into how occupiers use and plan their office space in Asia Pacific. Consistent with our findings last year, rent remains as the most important consideration. We witness a shift to a more flexible work environment – most notably in Australia and South East Asia.
 
“Our findings also support the principle that Asia Pacific continues to be a growth market, with over 60% of respondents foreseeing that their headcount will grow over the next 12 months – a positive sign for the region.”
 
On lease renewal, Marcus Burtenshaw, Executive Director and Head of Commercial, Knight Frank Thailand, highlights, “One interesting finding that consistently stands out is the number of firms that continue to leave it to the last six months before thinking about what to do at their next lease expiry. Six months does not provide enough time to properly weigh your alternatives, and to put contingency plans into action. This could potentially lead to occupiers facing no alternative but to accept the landlord’s proposed terms, whatever they might be. 
 
We recommend tenants to start this process at least a year in advance of lease expiry. Bear in mind though that tenants occupying multiple floors or in markets with limited options should start this process even sooner.”       
 
Highlights of survey results
 
Ranking office building attributes - 
Question: How would you rank the importance of office building attributes to your business?
  • All respondents from the public sector/NGOs regard rent as the most important factor out of the nine office building attributes surveyed.  
  • While rent is the primary consideration in general, local factors may be more important in some countries. In Hong Kong and China, rent comes in top for businesses, in which green credentials is placed at the bottom of the list.
  • Frequent traffic congestion leads Thailand to place greater value on proximity to mass transit than any other countries.
Office building satisfaction 
Question: How satisfied are you with your current building?
  • Satisfaction level is highest in places with the highest rents i.e. Hong Kong and Singapore.
  • The energy and finance/accounting/legal industries are the most satisfied with their office space, whilst the public sector/NGOs are the least satisfied.
Lease renewal preparation
Question: How far in advance of a lease expiry do you prepare for it?
  • Most of the respondents start preparing six months ahead of a lease expiry – this forms 42% of all the respondents.  The next popular timeframe is 12 months ahead, practised by 35% of the respondents.  Only 9% of all the respondents start preparation 24 months before lease expiry.
Space and labour acquisition
Question:  In the last 12 months, have you disposed of surplus or acquired additional office space?
  • Space: 38% of all the respondents acquired additional space in the last 12 months; whilst only 9% returned surplus space – these were primarily in the energy and consumer products sectors. 
Question: Over the next 12 months, how do you expect your headcount to change?
  • Labour: 60% of all the respondents expect to increase headcount over the next 12 months; whilst 6% expect the headcount to fall.
Cost-saving initiatives
Question: What cost-saving initiatives have you considered or implemented?
 
 Cost-saving initiatives
considered or implemented

 % responses
(all respondents)

 Split operations  17%
 Secondary location  20%
 Standardised desk allocation  21%
 Flexible working  25%
 Reduced area per person  27%
 None of the above  34%
  • “None of the above” was the most popular option selected by all respondents in terms of cost-saving initiatives to reduce their rental burden.  This is especially reflected in finance/accounting/legal, consumer products industries.
  • Despite paying the highest rents in the region, Hong Kong appears to be doing relatively little to save costs with 54% of the respondents from Hong Kong selecting the option “None of the above”.
Nelson Lam, Director of Commercial Agency, Knight Frank Hong Kong, explains, “The high costs of fit-out in Hong Kong, approximately US$100 psf, make it difficult to create sufficient improvements in efficiency through workspace planning to offset them. Hence, most firms will first choose to relocate or split operations, but even that is challenging given the current vacancy rate in Central Hong Kong of under 3%.”
 
Flexible work programme
Question: Do you adopt a flexible work programme?
  • 82% of the Australian respondents adopt flexible work practice.
  • Unexpectedly, none of the respondents from Hong Kong implement flexible work programme, despite the significant presence of multi-national corporations in the global city.
  • Most of the firms adopting flexible work arrangement are in typically innovative industries such as consulting, pharmaceutical and technology & communication fields.