FIRST Prime office occupancy costs, which include rent, local taxes and service charge, in Central clock in at a whopping $2,405 (US$306.57) per sqft annually as of Q1, far beyond London’s West End at $1,843 (US$235.01) and Beijing’s Finance Street at $1,576 (US$200.91). Kowloon also ranks amongst the world’s top ten priciest office locations, with prime office occupancy costs at US$189.56. Beijing CBD, Midtown and Midtown-South Manhattan, Tokyo, New Delhi and London complete the top ten. However, the share of flexible workspace in the office segment accounts for just 1.2% of occupied office space, one of the lowest penetration rates in Asia Pacific, according to JLL, which ranks Hong Kong alongside other APAC economies where growth is notably slowing such as Tokyo, Taipei and Auckland. On the other hand, cities from the Mainland like Beijing and Shanghai have the highest penetration rate of flexible
WeWork Causeway Bay
workspace in the region at 3.7% and 3.6%, respectively. Flexible spaces as a percentage of office space were similarly higher at 3.4%
“Flexible workspace accounts for just 1.2% of overall occupied space, one of the lowest rates in APAC.”
in Melbourne and 2.8% for both Singapore and Bengaluru. However, prospects for the office sector look promising especially with the Greater Bay Area plan set to fuel demand for office space. For more on co-working, see page 38 for details on the upcoming launch of WeWork Go
IPO proceeds hit $21.19b across 35 floats in Q1 Despite a general global slowdown in initial public offering (IPO) activity, the Hong Kong Stock Exchange (HKEx) ranked first by both volume and proceeds in the global IPO leaderboard with $21.19b (US$2.7b) clinched across 35 IPOs during the quarter, placing it amongst the top 10 global exchanges, according to a report from accounting firm EY. Hong Kong also ranked as the top initial public offering (IPO) destination in Q1 with a total of five cross-border IPO deals sealed during the quarter. By sector, industrials received the highest
The industrial sector had the most listings at 7
(US$285m), and Chinese ticketing app Maoyan Entertainment earned $1.96b (US$250m). In number of IPOs with seven deals, racking in a general, median deal sizes surged 84% YoY in total of $2.06b (US$263m) during the quarter. Q1 2019 to $275.47m (US$35.1m) from Q1 Consumer products (five deals) and real estate 2018, whilst median post-IPO market cap leapt (four IPOs) followed suit, earning $2.94b 69% YoY to $1.05b (US$134.5m). (US$375m) and $3.47b (US$443m), respectively. “After a strong IPO year in 2018, the first three months of 2019 have been quiet as a Mega deals number of companies already went public The largest Hong Kong IPO in terms of proceeds toward the 2018 year-end. Additionally, was by auto finance firm Shanghai Dongzheng new restrictions on “back door” listings has Automotive Finance Co. which bagged limited IPO activity on the junior market GEM $2.81b (US$358m). Biopharma company to only four IPOs raising a total of $290.39m CStone Pharmaceuticals clinched $2.24b (US$37m) in Q1 2019, compared with 33 IPOs that raised $2.24b (US$286m) in Q1 2018,” the report’s authors noted. Outlook Although Hong Kong experienced a remarkably strong 2018, the year ahead is expected to be comparatively slower with smaller IPO sizes and fewer mega deals, according to EY, with new-economy firms like pharmaceuticals, pre-revenue biotech and education companies driving listing activity. Reforms initiated by the HKEx will also continue to play a positive role in attracting issuers and help insulate the city against increasingly cautious investor sentiment as companies wait and see how geopolitical uncertainty, trade issues and a likely increase in interest rates could impact the capital markets, and, by extension, investor sentiment for IPOs.
HONG KONG BUSINESS | JULY 2019
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