HONG KONG INFRASTRUCTURE OUTLOOK When East Meets · PDF fileHONG KONG INFRASTRUCTURE OUTLOOK...

HONG KONG INFRASTRUCTURE

OUTLOOKWhen East Meets West

ContentsHong Kong Infrastructure Outlook – When East Meets West

New infrastructure set to enhance Hong Kong’s connectivity within the GPRD

East - Kowloon East expected to emerge as Hong Kong’s CBD2

West – The strategic location for integration with the PRD

Hong Kong as the hub of the GPRD: Implications for commercial real estate

05

11

12

17

27

Hong Kong Infrastructure Outlook – When East Meets WestHong Kong Infrastructure Outlook – When East Meets West

4 | | 54 |

Hong Kong has enjoyed solid economic growth over the past decade, with real GDP increasing by over 46% between 2004 and 2014, thanks in part to Chinese government-backed schemes such as the Closer Economic Partnership Arrangement (CEPA), Individual Visit Scheme (IVS), and most recently, the Shanghai-Hong Kong dual-market stock trading arrangement. This growth has stimulated strong demand for commercial real estate space in the city and has necessitated the construction of new bridges, roads, railway systems and other transportation infrastructure to support it.

The Hong Kong government has in recent years been implementing a massive programme of new infrastructure works comprising ten major projects, which were first unveiled in the 2007-2008 Policy Address. In September 2014, the Transport and Housing Bureau published its Railway Development Strategy 2014, which laid out plans to construct seven new railway networks to be completed over the next 15 years. On a regional level, Hong Kong has been

playing an important strategic role in the “Greater Pearl River Delta integration” initiative which forms part of the 12th Provincial 5-Year plan (2011-2015). This initiative aims to strengthen regional ties between Hong Kong, Macau and other free trade zones in southern China. More recently, the Chinese government has begun to implement the “One Belt One Road” initiative, in which Hong Kong will also play a key role.

The development of new infrastructure is a crucial step towards improving intra and inter-city connectivity and is essential to ensuring Hong Kong’s sustainable long-term growth. This report examines the major infrastructure projects currently under development or at the planning stage in Hong Kong and considers their potential impact on the city and on the real estate industry, in particular the office, retail and industrial sectors.

Hong Kong InfrastructureOutlook – When East Meets West

Hong Kong InfrastructureOutlook – When East Meets West


6 | | 7

North Island Line (2026)• 5 km line to connect Hong Kong

» Tamar » Exhibition » Causeway Bay North » North Point

• An extension to connect the existing Tung Chung Line and Tseung Kwan O Line along the Northern shore of Hong Kong Island

East Kowloon Line (2025)• 7.8 km line to connect Diamond Hill »

Choi Wan » Shun Tin » Sau Mau Ping » Po Tat » Po Lam

3

4

Tuen Mun Logistics Development (N/A)• 2 sites in Area 38 & 49; (10.6 ha) have been identified for

logistics usage• 4 sites in Area 40 & 46 (50.2 ha) have high potential for

logistics development; currently under study

Tseung Kwan O – Lam Tin Tunnel & Trunk Road T2 (2021)• Tseung Kwan O – Lam Tin Tunnel

– 4.2 km dual 2-lane highway; including 2.6 km tunnel

• Trunk Road T2 – 3 km dual 2-lane trunk road between Central Kowloon Route and Tseung Kwan O – Lam Tin Tunnel

10

118

15

12

Siu Ho Wan Reclamation (N/A)• Proposed to reclaim

100-150 ha of land to develop logistics and other economic activities

5

7

16

North East NewTerritories New Town Development (2031) • 643 ha; including Kwu Tung

North and Fanling North• A new station – Kwu Tung

station is planned on the existing Lok Ma Chau Spur Line

•To create 38k job opportunities; target focus in New Town Development

6

9

Tung Chung New Town Development (2024)• Office: 5.4 m sq ft; Retail: 3.3 m sq ft;

Hotel: 1,000 rooms

Hong Kong-Zhuhai-Macau Bridge & Boundary Crossing Facilities Island (2017) • HKZM Bridge – 55 km long• Driving time from Hong Kong

to Macau or Zhuhai will reduce from 4-5 hours to 45 min

• 130 ha of artificial island to house boundary crossing facility and immigration control

Guangzhou-Shenzhen-Hong Kong Express Rail Link (2018) • 26 km Hong Kong Section• 11 ha High-Speed Railway

underground terminus next to West Kowloon Cultural District

• Expected to carry about 99,000 passengers daily

• 14 min to Shenzhen Futian • 48 min to Guangzhou South

25

19

18

27 28

1

21

26

Central Kowloon Route (2021)• 4.7 km; including a

3.9 km tunnel• Dual 3-lane trunk road• Linking up Yau Ma Tei

Interchange in the West; and CBD2 in the East

• Applying for funding for construction

Environmentally Friendly Linkage System (2023) • The line will loop around

CBD2 with interchange at Kai Tak (to cross the Shatin-Central Link) and Kwun Tong and Kowloon Bay (to cross the Kwun Tong line)

• Further feasibility study is needed

East Lantau Metropolis (N/A)• Positioned to be CBD3 after

Central and Kowloon East• Prelim plan to reclaim

600-800 ha of land between Lantau and Hong Kong Island for commercial and residential development

Sunny Bay Reclamation(N/A)• Proposed to reclaim

60-100 ha of land for tourism and commercial usage

• Long term strategy to create synergy with Disneyland

24

South Island Line (East) (2016) • 7 km line to connect Admiralty »

Ocean Park » Wong Chuk Hang » Lei Tung » South Horizons;

• Admiralty as an interchange station with Island Line and Shatin-Central Link

Tuen Mun South Extension (2022) • 2.4 km extension from

existing West Rail Line for a new station in Tuen Mun South

Tuen Mun Western Bypass (N/A)• To link Tuen Mun - Chek Lap

Kok Link and Lam Tei exit of Hong Kong - Shenzhen Western Highway

14

20

13

South Island Line (West) (2026)• 7.4 km line to connect Wong

Chuk Hang » Aberdeen » Tin Wan » Wah Fu » Cyberport » Queen Mary Hospital » HKU

Kwun Tong LineExtension (2016) • 2.6 km • Extension to existing

Kwun Tong MTR line• Yau Ma Tei (existing) »

Ho Man Tin » Whampoa

• Ho Man Tin as an interchange station with Shatin-Central Link

23

22

Shatin-Central Link (2019-2021) • Travel time from Central to

Kowloon East shortened from 29 min* to 17 min

• Two sections (11 km; 6 km): (1) Tai Wai » Hin Keng » Diamond Hill » Kai Tak » To Kwa Wan » Ma Tau Wai » Ho Man Tin » Hung Hom; (2) Hung Hom » Exhibition » Admiralty

* Assuming existing stations between Central and Kowloon Bay before the Kai Tak station is completed

Hung Shui Kiu New Town Development (2037)• 150,000 new employment opportunities;

22.3 mil sq ft commercial space including office, retail, and hotel; 37.6 mil sq ft for industrial and special industrial uses

Hung Shui Kiu Station (2024) • A new station between the existing Tin Shui Wai Station and Siu Hong Station

Third Airport Runway (2023)• Reclamation of 650 ha of land at north of

the airport island• Allow Hong Kong International Airport

to handle future annual demand of 102 mil passengers; 89 mil tones of cargo; 607 k aircraft movements by 2030

Central-Wanchai Bypass (2017)• 4.5 km • Dual 3-lane trunk road

with a 3.7 km tunnel• Linking up Rumsey

Street Flyover in Central with the Island Eastern Corridor at North Point

17

2Tuen Mun - Chek Lap Kok Link (2016-2018)• 2 Parts:

(1) dual 2-lane linking between North Lantau Highway and Boundary Crossing Facilities Island (2016); (2) dual 2-lane sub-sea tunnel between Tuen Mun and Boundary Crossing Facilities Island (2018)

• Tuen Mun to Airport shortened from 30 min to 10 min

Liantang/ Heung Yuen Wai Boundary Control Point the associated highway (2018)• New Boundary Control

Point at Liantang/ Heung Yuen Wai

• 11 km dual 2-lane trunk road (with 5.7 km of tunnels) connecting with Fanling Highway

• Travel time from the boundary to Shenzhen Longgang » reduction from 49 min to 27 min

Northern Link (2023)• Connecting the existing

Kam Sheung Road Station (West Rail Line) with the new Kwu Tung Station (Lok Ma Chau Spur Line)

• To improve West-East connectivity in the New Territories

Tung Chung Line Extension (2024) • 1.5 km rail extension from

existing Tung Chung Line for a new station in Tung Chung West; a possible station in Tung Chung East subject to futher study

Kwun Tong Line Extension(2016)

Tseung Kwan O-Lam Tin Tunnel + T2 (2021)

Tuen Mun Western Bypass (N/A)

Tuen Mun South Extension(2022)

Third Airport Runway(2023)

Hung Shui Kiu Station(2024)

Hung Shui Kiu New Town

Development (2037)

Tuen Mun Logistics Development

(N/A)

South Island Line (West)(2026)

North Island Line(2026)

HKZM Bridge & Boundary Crossing Facilities Island (2017)

Siu Ho Wan Reclamation

(N/A)

East Lantau Metropolis

(N/A)

Sunny Bay Reclamation

(N/A)

Express Rail Link (2018)

Tuen Mun-Chek Lap Kok Link (2016-2018)

Central Kowloon Route(2021)

Shatin-Central Link(Hung Hom-Admiralty)

(2021)

South Island Line(East)(2016)

Central-Wanchai Bypass(2017)

Shatin-Central Link(Tai Wai-Hung Hom) (2019)

Environmentally Friendly Linkage System(2023)

East Kowloon Line (2025)

Northern Link (2023)

Tung Chung Line Extension (2024)

Tung Chung New Town Development

(2024)

North East New Territories New Town Development

(2031)

Liantang/ Heung Yuen Wai Boundary Control Point the associated highway (2018)

HONG KONG INFRASTRUCTURE OUTLOOK – When East Meets West

Pipeline / potential infrastructure projects to be completed

23

4Macau Ferry Terminal

Control Point

Kennedy TownHong Kong

CentralAdmiralty

HKU

Hung Hom

Yau Ma Tei

Chai Wan

North Point

Wong Chuk Hang

Po Lam

Lohas ParkTiu Keng Leng

China Ferry TerminalControl Point

Kwai Tsing ContainerTerminals

To Macau/ Zhuhai

Disneyland Resort

Sunny Bay

Tuen Mun

Tsuen Wan

Lai KingMei Foo

Kam Sheung Road

Kwu Tung

Tai Wai

Diamond Hill

Ho Man Tin

Kowloon Tong

Wu Kai Sha

AsiaWorld-Expo

Hong KongInternational Airport

Control Point

Tuen MunRiver Trade Terminal

Tuen Mun Ferry Terminal Control Point

Kai Tai Cruise TerminalControl Point

24

22

12

17

19

20

2

21

28

14

8

16

6

7

18

25

2627

3

1

11

5

10

13

9

4

15

Shenzhen BayControl Point

To Shenzhen/Guangzhou

Lo WuControl Point

Hung HomControl Point

Lok Ma ChauControl Point

Lok Ma ChauSpur Line Control Point

Man Kam ToControl Point

Sha Tau KokControl Point

Liantang/Heung Yuen Wai Control Point

42 3 5 71 6 98 121110 13 15 17 18 19 2014 16 21 22 23 24 25 26 27 28

Existing Railway

Future RailwayFuture Road

Projects under construction

Projects confirmed but construction not yet startedProjects under planning / study

Legend:

Source: CBRE Research, Q3 2015

CBRE GLOBAL RESEARCH This report was prepared by Hong Kong Research Team, which forms part of CBRE Global Research—a network of preeminent researchers who collaborate to provide real estate market research and econometric forecasting to real estate. © CBRE Ltd. 2015 Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not veri�ed it and make no guarantee, warranty or representation about it. It is your responsibility to con�rm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.

* No indicative timeline for projects with (N/A)


8 | | 9


CBRE GLOBAL RESEARCH This report was prepared by Hong Kong Research Team, which forms part of CBRE Global Research—a network of preeminent researchers who collaborate to provide real estate market research and econometric forecasting to real estate. © CBRE Ltd. 2015 Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not veri�ed it and make no guarantee, warranty or representation about it. It is your responsibility to con�rm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.

2011

2021

2021+

Future travelling time (min) by Road(Current travelling time (min) by Road)

Future travelling time (min) by Railway(Current travelling time (min) by Railway)

Current travelling time (min) by Ferry

Assume Peak Hours

Legend:

53kmrailway

12stations

HK$100billionInvestmentin Railway(under construction)

69km

highway130ha

reclamation

HK$147billionInvestmentin Highway(under construction)

35km

railway18stations

HK$110billionInvestmentin Railway(planning)

650ha

reclamation607k

aircraft102m

passengers 89m

tons cargoHK$150billionInvestment in3rd Runway(planning)

578,500 689,800 948,800

371,600 432,300 450,000

460,000324,800304,100

NORTH DISTRICT

YUEN LONG

TSEUNG KWAN O NEW TOWN

TUNG CHUNG NEW TOWN

718,600 842,200622,200

KOWLOON EAST

78,400 112,500 220,000

West Kowloon

Greater CentralCBD

Tseung Kwan O

Lantau

Macau/ Zhuhai

Tuen Mun Kwai Chung

Container Port

Shenzhen

Guangzhou SouthShenzhenQianhai

Futian

60

(210)75

(240)45

(30)10

(60)*15*

(45)*15*15

(27)

CBD2 (35)*5*

15(39)

48(130)

14(70)


10 | | 11

Guangzhou

Shenzhen

Lantau

Capital Dual Flow

Tourism Delta

Hong Kong

Macau

Zhuhai

Business Delta

Qianhai

Hong Kong, which provides a low rate of taxation, a free port, and well-established financial and legal systems, has a long history of trading with international countries. These strengths have allowed the city to play a crucial role at the forefront of the development of the Greater Pearl River Delta (GPRD) region since China launched its “open door” policy in the late 1970s.

Hong Kong-PRD ties continue to grow

While Hong Kong has helped the Chinese economy connect with the rest of the world, it has also benefitted in recent years from a number of preferential economic policies implemented by the government of the PRC. Indeed, economic ties between Hong Kong and mainland China will strengthen further in the future. Integration within the GPRD is the key theme under the 12th Guangdong Provincial Five Year Plan (2011-2015), which includes major initiatives such as facilitating Hong Kong and Macau’s cooperation with other PRD cities in developing modern services industries and upgrading existing manufacturing sectors. By building an extensive regional and cross-border infrastructure network, authorities plan to improve connectivity and establish one-hour commuting zones within the GPRD.

Infrastructure development in Hong Kong is therefore not only focused on improving accessibility among different districts within the city. It forms an integral part of theregional development plan in the GPRD and will

Source: Guangdong Government, Hong Kong SAR Government, CBRE Research, Q3 2015Source: Guangdong Government, Hong Kong SAR Government, CBRE Research, Q3 2015

New Infrastructure set to Enhance Hong Kong’s Connectivity within the GPRD

The GPRD has a population of 64 million and achieved a total GDP of USD 1,278 billion in 2014, a similar scale to Mexico and Spain. By 2020, travellers from Hong Kong will be able to access the entire GPRD within three hours.

The significant reduction in travelling time will facilitate the flow of business, knowledge, capital, people and trade among different cities within the GPRD.

Heyuan

Shanwai

Huizhou

Dongguon

Shenzhen

Guangzhou

FoshanZhaoqing

Jiangmen

Zhongshan

Zhuhai

Yunfu

Qingyuan

Hong Kong

Macau

Major Expressways

1-hour Commuting Circle within Metropolitan Area

1-hour Commuting Circle within Bay Area

1-hour Commuting Circle within Sub-Region

City Node

Chart 1: One-hour commuting circle within the GPRD

Chart 2: Tourism and business triangle between Hong Kong and nearby cities in the GPRD

reshape the spatial pattern of economic activity in the region.

The completion of infrastructure projects currently underway will more closely integrate Hong Kong with neighbouring cities in the GPRD. A “golden tourism triangle” will be formed between Hong Kong, Macau and Hengqin following the completion of the Hong Kong-Zhuhai-Macau Bridge. Commercial ties will also be enhanced between the business CBDs of Hong Kong, Qianhai, Futian and Guangzhou as road and rail connectivity is enhanced.

10 |


12 | | 13

23

1

4

5

Tai Wai

Hung Hom

Admiralty

KEY FUTURE INFRASTRUCTURE PROJECTS IN THE EAST

SHATIN-CENTRAL LINK (2019-21)

Cross Bay Link

Tseung Kwan O-Lam Tin Tunnel

Anderson Road Quarry Housing Development

Trunk Road T2

Ho Man Tin

Po Lam

Yau Ma TeiInterchange

Kai Tak Interchange

Whampoa

Diamond Hill

Commercial activity in Hong Kong has traditionally been focused on the northern coastal area of Hong Kong Island, encompassing areas such as Central, Admiralty, Causeway Bay and Quarry Bay, and alongside the Yau Tsim Mong area (Yau Ma Tei, Tsim Sha Tsui, Mongkok) of Kowloon. Over the last decade, however, more resources have been allocatedto developing the eastern areas of Kowloon.

In its 2011-12 Policy Address, the government announced plans to transform Kowloon East into an alternative business district, to be known as the CBD2. The area comprises the former Kai Tak Airport, Kwun Tong and Kowloon Bay, and was formerly a manufacturing hub. Now, it is set to be developed into a new commercial district to complement the city’s traditional CBD on Hong Kong Island in order to serve the growing requirements of corporate occupiers.

Infrastructure to support new office space

At present, Kowloon East is perceived to be relatively remote from established commercial areas on Kowloon and Hong Kong Island. Although the area is just 30 minutes by roador rail from the Central CBD, this is considered an excessive travelling time for many employees in the city. The rising number of office buildings constructed in Kowloon East in recent yearshas led to higher traffic flows in and around Kwun Tong and Kowloon Bay and has also stretched the capacity of the Mass Transit Railway (MTR) system.

East - Kowloon East Expected to Emerge as Hong Kong’s CBD2

Chart 3: Key future infrastructure projects in eastern Kowloon

1

2

3

4

5

Kwun Tong Line Extension

East Kowloon Line

Environmentally Friendly Linkage System

Central Kowloon Route

Tseung Kwan O – Lam TinTunnel + Trunk Road T2

Under Construction

Under planning

Under planning

Under planning

Under planning

Ho Man Tin & Hung Hom

Anderson Road Development Area

CBD2

CBD2, West Kowloon

CBD2, Tseung Kwan O

Yau Ma Tei Station to Whampoa Station

Po Lam Station to Diamond Hill Station

Kwun Tong, Kai Tak,Kowloon Bay

Yau Ma Tei interchange to Kai Tak interchange

Lohas Park to Kai Tak

2016

2025

2023

2021

2021

Project Link BetweenUnder Planning /Construction

Most Beneficial Area EstimatedCompletion Year

Legend

Railway

RoadFuture travelling time (min) by railway

(Current travelling time (min) by railway)

Legend

Source: MTRC, Hong Kong SAR Government, CBRE Reseach, Q3 2015

Source: MTRC, CBRE Reseach, Q3 2015

Extension of Existing Ma On Shan Line (2019) • Tai Wai* • Hin Keng • Kai Tak • To Kwa Wan • Ma Tau Wai • Ho Man Tin • Hung Hom*

Extension of Existing East Rail Line (2021) • Hung Hom* • Exhibition • Admiralty*

*Note: Interchange stations

(29)17


14 | | 15

Six major infrastructure projects are currently under planning or construction around Kowloon East in order to overcome these bottlenecks. These include the MTR’s Shatin-Central Link (SCL), Kwun Tong Line Extension and East Kowloon Line; a monorail system; and an integrated road network that connects east Kowloon and west Kowloon which consists of the Central Kowloon Route (CKR), Trunk Road T2 and the Tseung Kwan O – Lam Tin Tunnel [Please refer to the fly-box # 21-24 and 26-28 in the master map]

Connectivity will significantly improve once these infrastructure projects are completed. Travelling time between Kowloon East and other office hubs in western Hong Kong suchas Central and Kowloon West will be drastically shortened. Of the three sub-districts of Kowloon East, Kai Tak is expected to see the most significant improvements. The area will be able to be accessed by rail from CentralCBD and West Kowloon in within 15 minutes.

Unlocking the full potential of the CBD2

CBRE estimates that Grade A Office supply in Kowloon East will grow to around 18 million sq. ft. NFA by the end of 2019, with a potential long term capacity of a further 12 million sq. ft. NFA of space beyond 2020. If all this space were to be constructed, Kowloon East would surpass Greater Central (Core Central, Admiralty and Sheung Wan) to become the largest single office submarket in Hong Kong in within a decade’s time. In any case, new office supply in the Greater Central area willbe very limited in the foreseeable future. Kowloon East will therefore become an increasingly important and viable location for large companies looking to secure large office spaces for their operations.

Chart 4: Travelling time to Kowloon East - Before and After

Chart 5: Distribution of estimated future office supply for 2015-19 by key submarket

Greater CentralCBD

Central

KLE

WC/CWB

HKEast

TST

WCH

Current Stock

2015

2016

2017

2018

20190 2 4 6 8 10 12 14 16 18 20

West Kowloon

Kowloon EastTKO

CBD2

(60)*15*

(35)*5*

(45)*15*

(39)15

(27)15

Future travelling time (min) by railway(Current travelling time (min) by railway)


Legend

* Assume Peak Hours

49%

KLE

16%

KLN & NTOTHERS

15%

HK EAST

7%

WC/CWB

2%

CENTRAL

7%

WCH

4%

TST

2015-20199.8 mil sq ft

NFA


mil sq ft NFA

| 1514 |

49%

KLE

16%

KLN & NTOTHERS

15%

HK EAST

7%

WC/CWB

2%

CENTRAL

7%

WCH

4%

TST

2015-20199.8 mil sq ft

NFA

Source: MTRC, CBRE Reseach, Q3 2015


16 | | 17

A similar situation occurred in London around 15 years ago when Canary Wharf was considered to be relatively remote from Central London. However, following the completion of the Jubilee Line Extension in 1999, several large multinationals including HSBC and Citigroup moved their global or EMEA headquarters to the district due to the improved connectivity and comparatively good availability of suitable en-bloc office buildings. In the years since, the area has been transformed into a mature business district and is now home to the global headquarters of several major banks and professional services firms.

In Kowloon East, the recent acquisition of two office towers in One Bay East by Citi and Manulife appears to indicate that the same trend is now occurring in Hong Kong. CBRE expects this wave of relocations to continue as office stock in Kowloon East grows and as new infrastructure networks improve the connectivity of Kowloon East with other key districts in Hong Kong.

Wade Cruickshanks, Managing Director, APAC Region Head of Citi Realty Services, commented on Citi’s commitment to Kowloon East, "Citi has enjoyed 112 years of success in Hong Kong and it is our determination to continue to grow our business in Hong Kong. The purchase of the East Tower of One Bay East reinforces this commitment and is a testament of our belief in the Hong Kong Government’s vision for the future office market in Kowloon East, which we are confident will become a sought after location for MNC's."

Many of the infrastructure planning, development and construction over the current and last decade has been focused on facilitating growth of the eastern part of Hong Kong which will continue to evolve in the next 5-10 years. However, looking beyond the next decade, the focus of activity will gradually shift to the western part of Hong Kong. The west will bethe key strategic location for Hong Kong to connect with the emerging side of the PRD.

West – The Strategic Location for Integration with the PRD

A few key infrastructure projects are scheduled to be completed in western Hong Kong over the next decade. These include the Hong Kong-Zhuhai-Macau-Bridge (HKZM Bridge), Tuen Mun-Chek Lap Kok Link (TM-CLK Link) and the Express Rail Link. [Please refer to fly-box # 2, 5, 12 in the master map]

The new infrastructure will not only ensure Kowloon East has better accessibility to other major business hubs, but will also provide faster and more convenient access to the area for the working population living in West Kowloon, New Territories East and Hong Kong Island. Once the Shatin-Central Link is completed, CBRE estimates that approximately two-thirds of the Hong Kong population will be able to access Kowloon East by public transport within 30 minutes.

At the same time, the development of new residential areas in Kowloon East including Kai Tak, Yau Tong and in nearby areas such as Tseung Kwan O as well as the redevelopment area of Anderson Quarry is expected to attract an additional 300,000 residents by 2025. As both working and resident populations of the area increase in size, there will be growing demand for (and hence supply of) other commercial and community amenities including shopping malls, hotels, convention halls and recreational facilities, making Kowloon East a major new hub self-sustained by local talent and supporting amenities.

Chart 6: “Boomerang” development path in Hong Kong


•Over the last decade, more resources have been allocated to the development of the East of Hong Kong

•We expect the East will remain the key development zone in the next 5-10 years before it becomes fully mature

•Traditionally, commercial activity is most spatially concentrated in the central parts of the two shores of the Victoria Harbour.

•Looking beyond the next decade, the West of Hong Kong will emerge as the designated development area for the city’s longer term vision to formulate into the key strategic location for Hong Kong to connect with other PRD cities

Source: CBRE Press Release, June 2014 Source: CBRE Press Release, June 2014


18 | | 19

4

3

51

2

Following the completion of these projects, the western part of Hong Kong, particularly Lantau Island and West Kowloon, will become the focus, leveraging partly on the so called “bridgehead economy” connecting Hong Kong with the vibrant and rapidly growing PRD region including nearby free trade zones and business clusters such as Qianhai, Futian, Hengqin, and Guangzhou.

Lantau Island – focus of the “bridgehead” economy connecting Hong Kong with the western PRD

Lantau Island, where the Hong Kong portion of the HKZM Bridge is landed, is set to be transformed into a strategic location to link Hong Kong with the western PRD. Headline statistics for the PRD show that the western parts of the area trail the central and eastern zones in terms of economic development. The central and eastern zones of the PRD, ledby Guangzhou and Shenzhen respectively,each have a GDP of roughly US$350 billion, but GDP in the western zone is less than a third of this figure. The HKZM Bridge, which is scheduled to be completed in 2017, will become a crucial means by which to link the western PRD with the east to facilitate business, tourism and trade flows within the GPRD.

Chart 7: Key future infrastructure projects in the West

KEY FUTURE INFRASTRUCTURE PROJECTS IN THE WEST

Tuen Mun Area 38, 40, 46, 49 for

Logistics Development

Lantau

West Kowloon

To Macau/ Zhuhai

To Shenzhen Futian

1

2

3

4

5

Express Rail Link

Third Airport Runway

Hong Kong-Zhuhai-Macau Bridge & Boundary CrossingFacilities (BCF)

Tuen Mun – ChekLap Kok Link

Tuen Mun Western Bypass

Under construction

Under planning

Under construction

Under construction

Under planning

West Kowloon

Overall Hong Kong

Overall Hong Kong,Lantau / Tung Chung in particular

Airport and New Territories West

Tuen Mun & Hung Shui Kiu

Hong Kong, Shenzhen &Guangzhou

Expansion of existingHK Airport

Hong Kong, Zhuhai & Macau

North Lantau & Tuen Mun

Tuen Mun & Hung Shui Kiu

2018

2023

2017

2018

2021

Project

*Note: No indication of timeline

Link BetweenUnder Planning /Construction

Most Beneficial Area EstimatedCompletion Year

(60)20

RoadRailwayFuture travelling time (min) by railway(Current travelling time (min) by railway)


Legend

(70)14

Source: MTRC, Hong Kong SAR Government, CBRE Research, Q3 2015


20 | | 21

Incubating a future logistics hub

The completion of the HZMB Bridge will connect Hong Kong more closely with road networks in Mainland China and will shorten the travelling time between the western PRD and Hong Kong. For example, the travelling time between Zhuhai and Hong Kong International Airport will be reduced to only 45 minutes. Truck drivers using the bridge to travel from Zhuhai to the Kwai Chung Container Port will be able to cut their travelling time by 60%, to 75 minutes. In addition to the HKZM Bridge, the new TM-CLK Link, which is expected to be completed in 2018, will also help to shorten travelling times between the Hong Kong International Airport and Tuen Mun, from 35 minutes to just 10 minutes. This will enhance high value-added logistics flow in the northwest New Territories and will further strengthen the competitiveness of Hong Kong and cement its status as the key logistics, trading and business hub in the region.

Heyuan

Shanwai

HuizhouDongguon

Shenzhen

Guangzhou

FoshanZhaoqing

Jiangmen

Zhongshan

Zhuhai

Yunfu

Qingyuan

Macau

Hong Kong

To BeijingTo Shanxi

To Guangxi Province

To West GuangdongCoastal Cities

Chart 8: Comparison of travelling times to western PRD cities before and after the completion of the HKZM Bridge

Alongside the construction of new road and rail infrastructure, the Hong Kong government is also seeking to increase handling facilities and capacity to support logistics development. In May 2015, a final feasibility study was completed for two sites in Area 38 and Area 49 of Tuen Mun (near the TM-CLK Link Tuen Mun exit). The study suggested a potential 2.7 million sq. ft. of new warehouse space could be completed on the sites in 2019 and 2023, respectively, at the earliest. In the longer term, there is another 50 ha of land nearby (Area 40 & 46) under study which could potentially be released for logistics use. In addition, an extra 83 ha of land is planned for logistics and technology development in the future Hung Shui Kiu new town development area together with the existing industrial estates in Yuen Long and Tuen Mun. The northwest New Territories is set to emerge as a modern logistics hub upon the completion of the above mentioned projects. [Please refer to fly-box #5, 9 & 14 in the master map]

Travelling time by car from HK to relevant west shore citiesBefore (by Ferry) Before (by Car) After (by Car thru HZMB)

MACAU

ZHUHAI

JIANGMEN

ZHONGSHAN

1 hr

1 hrs 10 min

2.5 hrs

1.5 hrs

4 hrs

4 hrs

3.5 hrs

3 hrs

45 min

45 min

2 hr 15 min

1 hr 45min

20 | Source: Invest HK, CBRE Research, Q3 2015


22 | | 23

Tung Chung New Town Extension

Tung Chung New Town Extension

Proposed Hong Kong Link Road

Marine Viaduct

Proposed Tuen Mun - Chek Lap Kok Link

Proposed Airport North Commercial

District

The new road infrastructure and logistics hubs will benefit the trade of high value-added products as such goods are typically small in size and require a short delivery time and high security, and are best suited to air freight transit. There is already strong growth in the trade of export-oriented high value-added manufacturing goods in the western PRD as a result of the provincial government’s initiative to upgrade the production chain in the manufacturing sector. In Jiangmen, for instance, exports of new and high-tech products rose by 19% y-o-y in 2014, a rate well in excess of the city’s y-o-y total export growth of 6.7%. The completion of the HKZM Bridge will enable the Hong Kong logistics sector to capture the growth in demand for high value-added product logistics space from export-oriented manufacturers in the western PRD.

Expanding the capacity of Hong Kong's aviation industry

The Hong Kong section of the HKZM Bridgewill connect to a 130-hectare reclaimed island which will house cross-border facilities and

other commercial amenities [Please refer to fly-box #2 in the master map]. Travelers from outside Hong Kong will be able to use the HKZM Bridge to transit through Hong Kong airport without needing of an entrance visa into Hong Kong. This will encourage travelers from the western PRD to use the Hong Kong International Airport, which serves the most international destinations of any city in southern China.

The volume of passengers and logistics goods at the Hong Kong International Airport will increase as a result of greater demand from the western PRD. The recently approved construction of the third runway will help support this demand by increasing handling capacity at the airport. According to the Hong Kong International Airport by 2030, it will be able to handle 102 million passengers,8.9 million tons of cargo and 607,000 aircraft movements on an annual basis, supported by the third runway. This is a respective increase of 62%, 202% and 55% on the 63 million passengers, 4.4 million tons of cargo and 391,000 aircraft movements recorded in 2014. [Please refer to fly-box #1 in the master map]

Forging a new tourism hub for the GPRD

Over the past decade, Hong Kong has seen a surge in inbound tourism which has brought numerous benefits to the hospitality and retail industries. However, it has also created many bottleneck issues for the city and caused concern among local residents. The government has responded by formulating a plan to develop Lantau Island into a new commercial and tourism hub capable of easing some of the pressures on capacity in urban areas. The land use of the above-mentioned Boundary Crossing Facilities Island has yet to confirm but another proposal is to extend current facilities on North Lantau by building 1,000 hotel rooms and 5.5 million of sq. ft. of new retail space in Tung Chung New Town as well as the Airport North Commercial District. [Please refer to fly-box #3 & 4 in the master map]

Most commercial activity is planned to be concentrated on North Lantau. In contrast, the southern part of the island has been earmarked for the development of recreational facilities such as a waterfront promenade, marina berths, resorts and spas. The government is also planning to reclaim parts of Siu Ho Wan and Sunny Bay to facilitate future tourism and commercial development [Please refer to fly-box #6 & 7 in the master map]. Together with existing tourist attractions including Disneyland, the Big Buddha and Po Lin Monastery, Lantau Island is expected to emerge as a new recreational and tourism hub in the city. Linked by the HKZM Bridge, Lantau will be joined by Macau and Zhuhai’s Hengqin and form a world-class entertainment/gaming/leisure hub in the western GPRD.

TUEN MUN HUNG SHUI KIU

Tuen Mun - Chek Lap Kok Link

Area 38 & 4911 Ha

(identified for logistics use)

Area 40 & 46 50 Ha

(high potential for logistics development)

Area 40 & 46 50 Ha

(high potential for logistics development)

Hung Shui KiuLogistics & Technology Development Area83 Ha

Hong Kong- Shenzhen

Western Highway

Hong Kong International Airport

Proposed Boundary Crossing Facilities

Tai Ho Wan

To Urban

Asia World Expo

Airport

Tung Chung

To Tuen Mun & North WestNew Territories

Hong Kong-Zhuhai-Macau Bridge

To HKIA

Proposed 3rd Runway

To Shenzhen Bay

To Tuen Mum

Chart 10: Proposed Boundary Crossing Facilities

Chart 9: Future logistics development zone in Tuen Mun and Hung Shui Kiu

Source: Planning Department, CBRE Research, Q3 2015

Source: Highways Department, CBRE Research, Q3 2015

Railway links (existing)Road

Legend


24 | | 25

Plans for a 3rd Generation CBD-the East Lantau Metropolis

The long-term development of Lantau Island also involves the construction of new commercial and residential real estate. A potential 5.38 million sq. ft. of office space and 48,000 residential units are planned to be developed in Tung Chung East as part of the blueprint to extend the Tung Chung New Town. The new development area will house another 140,000 residents, pushing up the total population of Tung Chung New Town to 220,000.

A more long-term plan is the creation of an “East Lantau Metropolis” which would involve the creation of a 1,000-ha artificial

island(s) by reclaiming an area of sea between western Hong Kong Island and eastern Lantau Island. This area is planned to become Hong Kong’s third-generation CBD after Central and Kowloon East and could potentially also involve the construction of bridges and/or tunnels to connect it with Hong Kong Island, Lantau Island and possibly Kowloon. Depending on connectivity, the future CBD on East Lantau Metropolis could be just minutes away from the Central CBD. [Please refer to fly-box #8 in the master map]

Should this project be given the green light, it would further cement Lantau Island’s position at the forefront of the bridgehead economy. However, the government will need to

formulate an effective masterplan taking into account land usage, job opportunities, the living environment and connectivity between the urban areas of Hong Kong, Lantau and the rest of the PRD to ensure its success. The government should also have a clear vision of how Lantau Island can blend in with the long-term development of Hong Kong and in particular how it will relate to the future roleof Central, Kowloon East and West Kowloon.

West Kowloon - The most accessible business node to the mainland

West Kowloon is conveniently located, being just one MTR station from the Central CBD. The district is 20 minutes from the Hong Kong International Airport and has good connectivity to many residential districts especially those along the Tung Chung Line and the West Rail Line. The completion of the Express Rail Link in around 2018 will significantly reduce the inter-city travelling time from West Kowloon to cities in southern China. For example, the travelling time to Futian in Shenzhen will be shortened from an hour to just 14 minutes. It will takejust 50 minutes to reach Guangzhou compared to the current two hours. West Kowloon will also be accessible to Qianhai, a fast emerging special economic zone in Shenzhen, in about 30 to 40 minutes. [Please refer to fly-box #12 in the master map]

Business travellers in China are increasingly using high-speed trains when travelling between cities because they are more frequent than flights and also because they provide passengers with the ability to utilise mobile communications during their journey. The new Express Rail Link is set to open up the whole of China’s high-speed train network to travellers from Hong Kong and will make West Kowloon a more attractive office location for frequent business travellers between Hong Kong and the Mainland.

In addition to the 2.8 million sq. ft. office space planned atop the Express Rail Link Terminus, there will be an extra 1 million sq. ft. of potential

office space in the West Kowloon Cultural District (WKCD), bringing the total Grade A office stock in West Kowloon from the current 2.3 million sq. ft. GFA to reach circa 6.0 million sq. ft. GFA. This would make the area large enough to serve as a new office cluster supported by nearby facilities such as shopping malls and hotels. The total retail floor space in West Kowloon will eventually reach 2.0 to 2.5 million sq. ft. which includes the planned 1.2-1.6 million sq. ft. retail space in the WKCD combined with the existing 890,000 sq. ft. of space inthe nearby Elements shopping mall. All ofthese new developments could eventually blend West Kowloon with the existing commercial facilities in Tsim Sha Tsui and form a Greater Tsim Sha Tsui commercial cluster.

Chart 11: Preliminary concept for East Lantau Metropolis

Chart 12: Express Rail Link West Kowloon Terminus – to connect Hong Kong with Shenzhen & Guangzhou

Source: Development Bureau, CBRE Research, Q3 2015

Source: MTRC, CBRE Research, Q3 2015

Tsing Yi

Hong Kong Island

Central CBD

Kowloon

Lantau Island

Hong Kong International Airport

Mui Wo

Peng Chau

Kau Yi Chau

Hei Ling Chau

Express Rail LinkWest Kowloon

Terminus

Austin Station

Express Rail Link

Kowloon Station

Proposedreclamations in

Siu Ho Wan & Sunny Bay

Prelim idea of East Lautau Metropolis areas

Prelim idea of transportation links

Railway links (existing)

Tuen Mun - Chek Lap Kok Link (under construction)

Legend

Estimated Journey Time

Estimated Capacity

Hong Kong - FutianHong Kong - Shenzhen NorthHong Kong - Guangzhou South

Able to carry ~99,000 passengers daily

14 min23 min48 min

To Shenzhen/ Guangzhou


26 | | 27

The development of new infrastructure is set to play a critical role in supporting improved connectivity both within Hong Kong and also in the GPRD. Enhanced integration will support the economic growth of Hong Kong and filter down to benefit each commercial real estate sector.

Improved connectivity to benefit existing and future CBDs

Hong Kong as the Hub of the GPRD: Implications for CommercialReal Estate

Kowloon East is set to benefit greatly from improvements to intra-city infrastructure. At present and in the foreseeable future, there are limited office options for large occupiers seeking contiguous space in traditional office submarkets. As such, many multinationals are forced to consider relocation options elsewhere. Kowloon East, which boasts the largest volume of office supply of any district in the next 5-10 years, will be the most viable submarket, especially after the completion of the Shatin-Central Link, which will reduce travelling time to the Central CBD to just 20 minutes.

The scheduled completion of MTR’s South Island Line (East) is set to improve the connectivity of Wong Chuk Hang which is currently undergoing a facelift. However, the district lacks government and investment leads relative to Kowloon East. The piecemeal developments in the pipeline will more likely leave Wong Chuk Hang as an office cluster for middle-to-back-office operations.

West Kowloon will also benefit from the new Guangzhou - Shenzhen - Hong Kong Express Rail and should emerge as a more attractive location for companies whose staff require frequent travel to the Mainland. In the very long term, the East Lantau Metropolis has the potential to be developed into a third-generation CBD which could serve as an extension of Central providing close links to cross-border infrastructure and the city’s future tourism hub.

OFFICE

| 2726 |


28 | | 29

New retail clusters to emerge

RETAILThe construction of new cross-border infrastructure will transform Hong Kong, Macau and the Pearl River Delta into a world-class tourism hub which will stimulate the flow of visitors between the cities. The Hong Kong retail landscape is facing a challenging period due to a shiftin PRC visitors’ spending patterns away from luxury goods, a clampdown on parallel traders and the stronger Hong Kong dollar relative to other currencies. These trends have prompted the government to begin to focus on developing sustainable and long-term retail and tourism attractions rather than over-relying on consumption. Other than new retail space and tourist attractions on Lantau Island, CBRE expects the retail landscape extend to future new towns in the New Territories. New infrastructure will improve accessibility to decentralised locations and facilitate township development. More retail supply in fringe locations will help alleviate the current challenges relating to the city’s handling capacity and will also enhance Hong Kong’s appeal as a top tourist destination for shopping, leisure and recreational activities.

28 |


30 | | 31

Capitalising on the high value-added logistics belt in the WestThe expected construction of the third runway at the Hong Kong International Airport will augment Hong Kong’s advantage in the area of air freight logistics, especially for high value-added goods. The completionof the HKZM Bridge and TM-CLK Link will enable the cross-border logistics belt to connect the Western and Eastern GPRD through Hong Kong, strengthening the city’s position as a re-export hub for Mainland China. The current cargo hub in Kwai Chung and Tsuen Wan will continue to expand into the western New Territories districts and Tuen Mun is set to become an increasingly important logistics hub upon the completion of the TM-CLK Link as well as the plan to construct new logistics parks in the area.

LOGISTICS

| 3130 |


32 | | 33

The construction of new infrastructure will bring with it a multitude of new opportunities for Hong Kong. However, success will rest on how the city leverages on closer GRPD integration to connect with neighbouring cities and attract stronger flows of people, money, trade and business.

New domestic infrastructure will enable the city to diversify its commercial activity away from the traditional urban core by providing better linkages between the city’s east and west. Inter-city infrastructure development with the GPRD will allow new office and tourism clusters such as West Kowloon and Lantau Island, respectively, to capitalise on opportunities derived from the growing ties between Hong Kong and neighbouring cities such as Macau, Shenzhen, Zhuhai and Guangzhou.

Other cities in the GPRD are growing rapidly and playing an increasingly important role in the economy of Mainland China. Hong Kong must act quickly to connect with the rest of the GPRD region and ensure its major infrastructure works are completed on time so it is not left behind.

The Way Forward

| 3332 |

NOTES NOTES

For more information about this report, please contact:

To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at www.cbre.com/researchgateway

Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.

Printed on recycled paper

© CBRE Ltd. 2015

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