June was anything but uneventful in Hong Kong. Curiously, however, the stock market performed relatively well over the month. The Hang Seng Index rose about 6 percent for the month. While more moderate news flow regarding the US-China trade disputes has improved sentiment, the rise also demonstrates the resilience of Hong Kong as a financial hub.
The 2019 Global Talent Trends report by Mercer, a consultant to institutional investors, has listed Hong Kong as the most expensive city in the world. Ranking number 2 and 3 are Tokyo and Singapore, the other two financial centers in the region. While being the most expensive also suggests other issues such as an undersupply of real estate, the fact that Hong Kong is currently the most expensive is yet another indicator of Hong Kong’s economic strength.
As we have reported in this column before, Grade-A office rent in Central is the highest in the world, and that in Island East is the twelfth highest. The high rental has been supported by a sustained expansion of demand from Chinese, foreign and domestic companies. Co-working space has also improved the efficiency of the overall office market by providing an immediate and often cheaper option.
Most recently, we have noticed that some established entities are also turning to co-working space. For example, some financial services entities, such as hedge funds or the Asia office of large institutional investors, are often quite efficient in staffing needs. Even in its mature stage, a hedge fund may require less than ten people.
In the past, these entities will often lease a standalone office. Recently, however, some of them have moved into serviced offices. In this setup, the entity will still have an exclusive space, usually for record keeping and other sensitive work tasks. Business meetings typically take place in conference rooms that are available on a per-hour basis. For day-to-day work, individual staff may choose among several options such exclusive space, library-like work area or the lounge. The flexibility can improve work morale and effectiveness.
In a way, this is similar to how barristers’ chambers work. A chamber is often founded by or named after a senior and reputable barrister, but the individual barristers do not work for the founder. Instead, the barristers all operate independently under their own name, but a good supporting structure will help the barristers to operate efficiently. For example, a large and well-maintained law library can speed up the research process during case preparation. Administrative staff can also take over mundane details.
Thus, a barristers’ chamber is an unincorporated association for the barristers to share background expenses such as rents and salaries of supporting staff. Any mentoring or fraternization developed among individual barristers would be a secondary benefit.
We were told that the regional office of a pension fund from a G7 country has reduced its office needs from 3,000 square feet to about 1,000. The tenant ended up paying a higher per-square-foot rent but reducing the overall bill. If sustained, this trend can increase the total number of firms supported by the office sector and also increase the per-square-foot rent in Hong Kong.
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