“There’s no need to be concerned,” he said. “It’s a question of how you can play to your strengths going forward. And therefore I wouldn’t even make that comparison whether it is still the number one capital for luxury goods or whether it’s the number one capital for this or that. It’s overall a pretty outstanding location, and pretty outstanding locations will be successful.”
In town as part of an Asia-Pacific tour including visits to Singapore and Australia, Ulbrich said his first visit to Hong Kong since 2020 has reminded him of the quality of the infrastructure, the amount of capital and the high level of talent available here.
“If I had to make a comment on how Hong Kong perceives itself, I wouldn’t look back, I would look forward,” Ulbrich said. “I wouldn’t be too worried about whatever role Hong Kong played in the past. I would be focused on what role Hong Kong can play going forward, and … it’s very hard to find a place in the world with such outstanding infrastructure.”
Hong Kong’s location and connection to mainland China is a large and enduring advantage, according to Ulbrich. “It’s a gateway for capital into the second-largest economy of the world,” he said.
“If you look at our organisation, this is where we have the highest number of employees in one market in the world,” Ulbrich said. “It’s not New York. It’s not Paris. It’s Hong Kong. We have 106,000 staff globally, and we have 7,000 in Hong Kong.”
Beijing retail rents jump by most since 2019 amid ‘demand surge’
Beijing retail rents jump by most since 2019 amid ‘demand surge’
Amid interest rates at a level not seen since 2007 and a sluggish economy due in part to the slow return of tourists, both residential home prices and shop rents are down; the former hit an eight-year low in February and the latter ended 2023 10 per cent below their pre-pandemic peak. Meanwhile one of the longest streaks of double-digit office-vacancy rates has been under way since late 2022 as tenants give up space even as new buildings bolster supply.
Ulbrich conceded that Hong Kong might be a bit more challenged than other cities given that China’s economy has not recovered as strongly as many had anticipated and that flexible work arrangements had an impact on companies’ real estate requirements.
Another issue is the age of Hong Kong’s office buildings. Of the total empty prime office space in Hong Kong, buildings that are at least 30 years old account for a quarter, while those between six and 15 years old account for 14 per cent, according to JLL’s research.
“It’s a lot of vacancy,” Ulbrich said. “But every market has its own short-term trends.”
Although those short-term trends are “slightly more challenging” for Hong Kong than some other markets, it does not change the general trend that tenants are trying to get into the best buildings with the highest ESG (environmental, social and governance) credentials, he added.
As for high interest rates that have dampened investment appetite, Ulbrich said investors should learn to navigate this new reality.
“The market has to adapt to the interest rates,” he said. “These are not particularly high interest-rate levels. In the longer history, this is a very normal interest-rate level. And so I wouldn’t be too focused on the interest-rate level and whether they come down.”
JLL, for one, is not betting on a big reduction, Ulbrich said.
“I don’t know whether [rates] will come down,” he said. “But I would be hesitant to make a bet that they will come down very significantly.”
