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Kenneth Ko

Developers are expressing grave concerns and doubts about the accuracy of the Government's forecast for long-term supply and demand of office space.

 A study prepared by consultants appointed by the Planning Department predicts that Hong Kong's demand for offices will rise to 180.8 million square feet in 2011, more than double the supply of 86.9 million sq ft in 1996.

 It concludes that the central business district (CBD) should be expanded, preferably through harbour reclamation, to meet the demand for offices, and efforts should be made to develop new and decentralised office precincts.

 The Real Estate Developers Association (Reda), representing most local developers, has voiced its reservations and concerns over the study's findings.

 Robert Wong, executive director of Hongkong Land, the biggest office landlord in Central, said he questioned the accuracy of forecasts made in the Study on the Propensity for Office Decentralisation and the Formulation of an Office Land Development Strategy.

 He said the forecast office demand was exceptionally high, even when compared with the boom period of the early 1990s.

 The government-sponsored study's forecasts implied an annual demand or take-up of 6.2 million sq ft in the 15 years from 1996 to 2011.

 Mr Wong said independent industry statistics reported an average take-up of 4.8 million sq ft per annum even in the 1991-1993 peak period. Average annual take-up was estimated at 2.8 million sq ft between 1986 and 1998.

 He questioned the rationale of the study's forecast of an annual demand of 6.2 million sq ft between 1996 and 2011, and whether its projections were fair and reasonable.

 He also disagreed with the study's forecast that the existing supply of committed office space would be absorbed by 2002. The study put the committed supply at 44.1 million sq ft between 1996 and 2002.

 Mr Wong said that with annual take-up estimated at 2.8 million sq ft in the past two years, it would mean under the government study's model that the market had to absorb eight to nine million sq ft of office space per annum from now to 2002.

 This seemed implausible, considering the current economic downturn.

 Mr Wong said his views were shared by other Reda members.

 He said if the Government followed the study's findings to develop land for offices, it could potentially result in a substantial over-provision.

 He said he hoped the Government would think twice about proceeding with any future harbour reclamation project for this purpose because it could not be reversed.

 He urged the Government to be more prudent in its decision-making and re-assess the situation based on the latest statistics, bearing in mind the dramatic changes in economic conditions.

 A senior executive of another property company, who spoke on condition of anonymity, said the study had grossly over-estimated demand and grossly under-estimated supply.

 The study's findings were for long-term planning for 10 to 20 years and would have a profound effect on the market, he said. Since the study's forecasts were based on the high-growth economic scenario before the financial crisis, a review was needed, he said.

 The executive said the study had focused on the development of new land, mainly through reclamation, for office space and put much less weight on the role of urban redevelopment.

 He said urban redevelopment played a key role in the provision of new office space and market forces would encourage developers to convert old buildings into offices if there was demand.

 Market statistics estimated that 70 per cent of office supply had come from urban redevelopment in the past.



Sky-high forecast worries developers