Our interviews with in-country sources in Hong Kong in February and July 2010 indicate that the Special Administrative Region (SAR)'s commercial real estate market is clearly recovering well after a difficult period in 2009. Rents have stabilised and are now rising. Further increases are expected next year. Yields in the office and retail sub-sectors have fallen back to levels that were prevailing prior to the global financial crisis. The implication is that capital values are expected to grow steadily in a market that has benefited over time from both careful management by the Hong Kong government as well as the growth in trade. Yields in the industrial sector appear to have fallen sharply over the last year or so. Looking forward, we expect yields to move sideways in the office and retail sub-sectors. In the industrial sub-sector, however, yields should rise from what appear to be unreasonably low levels. Key Features Of This Report This is the latest edition of a new series of industry reports published by BMI that seeks to identify the key dynamics of the real estate sectors of 44 countries around the world, some of which are developed and some of which are, in every sense, emerging markets. Once again, the questions that we seek to answer for each country remain as follows: What are the main issues that will matter to actors in and around real estate development in the country concerned, both over the long and the short term' What are the main constraints that they face' What are the key insights that one garners when one compares the real estate sector of the country concerned with its peers in other countries' In Q3 we have introduced a very substantial new improvement to the reports. We have incorporated data and qualitative observations provided to us by commercial real estate agents operating in the countries we survey. As a result we have gained a much clearer picture of the balance between demand and supply in each of three main sub-sectors ' office, retail and industrial. We have also introduced a new approach to the forecasting of rental yields, which is discussed in the methodology sector of this report. In Q4, we have incorporated a lot of new data in relation to rents and yields in 2010. We gained this data by way of a new round of interviews with our in-country sources in mid-2010. In some cases, the latest information from our sources has caused us to make significant revisions to our forecasts for 2011-2014. We asked our sources to indicate what growth in rents is likely for 2011. We explain their answers in the Forecast Scenario section.

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Hong Kong Real Estate Report Q4 2010
Published on September 2010
Report Summary
Our interviews with in-country sources in Hong Kong in February and July 2010 indicate that the Special Administrative Region
(SAR)'s commercial real estate market is clearly recovering well after a difficult period in 2009. Rents have stabilised and are now
rising. Further increases are expected next year. Yields in the office and retail sub-sectors have fallen back to levels that were
prevailing prior to the global financial crisis. The implication is that capital values are expected to grow steadily in a market that has
benefited over time from both careful management by the Hong Kong government as well as the growth in trade.
Yields in the industrial sector appear to have fallen sharply over the last year or so. Looking forward, we expect yields to move
sideways in the office and retail sub-sectors. In the industrial sub-sector, however, yields should rise from what appear to be
unreasonably low levels.
Key Features Of This Report
This is the latest edition of a new series of industry reports published by BMI that seeks to identify the key dynamics of the real estate
sectors of 44 countries around the world, some of which are developed and some of which are, in every sense, emerging markets.
Once again, the questions that we seek to answer for each country remain as follows: What are the main issues that will matter to
actors in and around real estate development in the country concerned, both over the long and the short term' What are the main
constraints that they face' What are the key insights that one garners when one compares the real estate sector of the country
concerned with its peers in other countries'
In Q3 we have introduced a very substantial new improvement to the reports. We have incorporated data and qualitative observations
provided to us by commercial real estate agents operating in the countries we survey. As a result we have gained a much clearer
picture of the balance between demand and supply in each of three main sub-sectors ' office, retail and industrial. We have also
introduced a new approach to the forecasting of rental yields, which is discussed in the methodology sector of this report.
In Q4, we have incorporated a lot of new data in relation to rents and yields in 2010. We gained this data by way of a new round of
interviews with our in-country sources in mid-2010. In some cases, the latest information from our sources has caused us to make
significant revisions to our forecasts for 2011-2014. We asked our sources to indicate what growth in rents is likely for 2011. We
explain their answers in the Forecast Scenario section.
Table of Content
Executive Summary ... 5
SWOT Analysis .... 6
Hong Kong Real Estate/Construction SWOT ..... 6
Hong Kong Political SWOT ... 6
Hong Kong Economic SWOT . 7
Hong-Kong Business Environment SWOT .. 7
Regional Real Estate Overview 8
Table: Asia Pacific's Office Markets At A Glance ' Rents, 2009-2011 (US$ per square metre per month) .. 8
Table: Asia Pacific's Retail Markets At A Glance ' Rents, 2009-2011 (US$ Per Square Metre Per Month) ..... 10
Table: Asia Pacific's Industrial Markets At A Glance ' Rents, 2009-2011 (US$ per square metre per month).. 12
Real Estate Market Overview . 14
Table: Hong Kong Real Estate Markets ' Rentals, 2008 And 2009 (square metres per month, HKD) . 14
Hong Kong Real Estate Report Q4 2010 Page 1/4

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Table: Hong Kong Real Estate Markets ' Net Yield, 2008 And 2009 (%) .. 14
Table: Hong Kong Real Estate Markets ' Terms Of Contract/Lease ... 15
Table: Hong Kong Real Estate Markets ' Available And Vacant Space ..... 15
Forecast Scenario .... 16
Real Estate Outlook ...... 16
Table: Hong Kong Real Estate Markets ' Rentals In Square Metres Per Month (HKD) . 17
Table: Hong Kong Real Estate Markets ' Net Yield, 2008-2014 (%) .. 17
Construction Outlook .... 17
Table: Hong Kong's Construction And Infrastructure Industry, 2007-2014 ...... 18
Macroeconomic Outlook ...... 20
Table: Hong Kong ' Economic Activity, 2007-2014 ...... 22
Business Environment ... 23
Real Estate/Construction Business Environment Ratings ..... 23
Table: Asia Real Estate/Construction Business Environment Ratings . 23
Hong Kong's RECBER . 24
Asia Pacific Project Finance Ratings 25
Table: Design And Construction Rating ... 27
Table: Commissioning And Operating Rating . 28
Table: Overall Project Finance Rating ..... 29
Hong Kong's Business Environment .. 30
Table: BMI Business And Operational Risk Ratings ...... 31
Table: BMI Legal Framework Ratings ..... 34
Table: Labour Force ..... 37
Table: Annual FDI Inflows Into Asia, 2006-2008 ... 39
Table: Trade Ratings .... 40
Table: Hong Kong's Top Export Destinations, 2001-2008 (US$mn) ... 41
Company Monitor ..... 44
Cheung Kong (Holdings) ..... 44
Cheung Kong Infrastructure (CKI) Holdings ... 46
Chinese Estates Holdings (CEH) 48
CLP Power Hong Kong 50
Henderson Land Development (HLD) ...... 52
Sino Land . 54
Sun Hung Kai Properties ..... 56
BMI Methodology ..... 58
How We Generate Our Industry Forecasts ...... 58
Construction Industry ... 59
Bank Lending .. 60
Real Estate/Construction Business Environment Rating 60
Table: Weighting Of Indicators .. 61
Project Finance Ratings Indicators ... 63
Table: Design And Construction Phase .... 63
Table: Commissioning And Operating Phase ' Commercial Construction 64
Table: Commissioning And Operating Phase ' Energy And Utilities .. 65
Table: Commissioning And Operating Phase ' Transport .... 67
Sources .... 68
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