Asia City Centres Shifting as Rents Rise and Infrastructure Improves

Five years ago if you had asked a Shanghainese the way to the downtown business district, he likely would have pointed you in the direction of West Nanjing Road. In Hong Kong you’d have headed to Central, or in Singapore to Raffles Place. Today Asia’s city centres are more difficult to pin down and by 2020 a wave of micro- and satellite city centres are likely to dot Asia’s urban map.

A regional study of office trends by released this week by real estate services firm JLL, released findings on the shifting face of city centres region-wide, based on discussions with 40 leading corporate landlords and tenants from Hong Kong, Singapore, Tokyo, Mumbai, Shanghai and Sydney in a series of roundtable debates.

Mapping Out Shifting City Centres

The agency’s resulting Offices 2020 report reveals rapid decentralisation across all six cities as lower rents and new facilities in alternative CBDs, business parks and peripheral centres lure occupiers away from traditional central locations.

Jeremy Sheldon, JLL Head of Markets for Asia Pacific, says the need for greater efficiencies following the Global Financial Crisis was the most commonly cited reason for moving.

“The world has changed dramatically since the GFC. The new paradigm, especially in the financial industry, is the need for efficiency in everything to compensate for the cost of new regulation. Basel III capital requirements add to costs further.”

“So when banks start looking down their cost profiles real estate is the first thing, after human capital and IT, with which they can really do new things.”

Growth in Future Stock Moves to the Fringes

JLL’s office stock forecasts for 2020 underline the trend, with growth in decentralised areas outstripping saturated CBDs. In Shanghai, low land availability and expansion of the metro system will drive the region’s biggest change with decentralised Grade A office space set to almost triple by 2020.

In Hong Kong, four new office hubs on Hong Kong Island and Kowloon are expected to emerge as core front office locations. Mumbai’s Secondary Business District, the Bandra Kurla Complex, will see supply growth of 15 per cent per annum.

But unlike some peripheral locations in western cities that historically have suffered from poor infrastructure and connectivity, new hubs in Asia tend to be better served, thanks largely to more streamlined ownership, says Sheldon.

“Asia Pacific markets are still dominated by a few individual players who own entire sites and that allows them to make the whole site efficient and inter-connected. Take the alternate CBD of Hong Kong East. It’s owned by one landlord who controls the roads, the buildings, the entire infrastructure.”

Back office staff are first to be moved, with Offices 2020 revealing a reluctance among senior executives to relinquish their view of old, famous landmarks. Dr. Megan Walters, Head of Research, Asia Pacific Capital Markets, explains that while IT facilitates remote working and decentralisation, face-to-face time is still highly valued.