Hong Kong Business (October - December 2023) by Charlton Media Group

Display to 31 December 2023 HK$40

Issue No. 72 Hong Kong’s Best Selling Business Magazine

THE PROPERTY ISSUE

DIVERSIFICATION TO SHAPE REAL ESTATE INVESTMENTS IN 2024

HIGH INTEREST RATES STALL FOREIGN PROPERTY DEALS 20 TOP REAL ESTATE AGENTS UNDER 40 OCCUPIERS, HOMEBUYERS GAIN LEVERAGE IN HK PROPERTY SLUMP 4 KEY FACTORS FOR HK FIRMS TO SUCCEED IN SOUTHEAST ASIA

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HONG KONG BUSINESS | Q4 2023

HONG KONG

FROM THE EDITOR

BUSINESS

Established 1982 Editorial Enquiries: Charlton Media Group Hong Kong Ltd Room 1006, 10th Floor, 299 QRC, 287-299 Queen’s Road Central, Hong Kong | +852 3972 7166

elcome to our annual property issue, which finds that almost 5% to 6% of Hong Kong market's purchasing power has gone due to interest rate hikes. The rising interest rates, alongside an additional 30% stamp duty, have posed challenges for foreigners looking to purchase properties in the city, a topic explored further on page 30.

PUBLISHER & EDITOR-IN-CHIEF Tim Charlton ASSOCIATE PUBLISHER Louis Shek EDITORIAL MANAGER Tessa Distor PRINT PRODUCTION EDITOR Anna Mae Rodriguez PRODUCTION TEAM Noreen Jazul Consuelo Marquez Olivia Tirona EDITORIAL RESEARCHER Angelica Rodulfo GRAPHIC ARTISTS Emilia Claudio Simon Engracial COMMERCIAL TEAM Janine Ballesteros Jenelle Samantila Cristina Mae Posadas ADVERTISING CONTACTS Louis Shek +852 6099 9768 louis@hongkongbusiness.hk Shairah Lambat shairah@charltonmediamail.com AWARDS Julie Anne Nuñez awards@charltonmediamail.com

Whilst current market conditions may not be favourable for foreign investors, they present opportunities for local occupiers and buyers who are now actively negotiating substantial discounts of up to 30%, as discussed on page 36. For local and foreign investors, experts suggest diversifying portfolios in 2024 by exploring alternative sectors such as student housing, multi-family properties, and senior living. Discover other lucrative investment avenues on page 28. To support your future investments in Hong Kong, we have listed the city's top real estate agents under 40 for you to connect with. The entire list is on pages 32 to 35. Read on and enjoy!

ADMINISTRATION Eucel Balala accounts@charltonmediamail.com EDITORIAL editorial@hongkongbusiness.hk

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HONG KONG BUSINESS | Q4 2023

CONTENTS

COVER STORY

TO SHAPE REAL ESTATE 28 DIVERSIFICATION INVESTMENTS IN 2024

FIRST 06 How will Hongkongers dine by 2040 08 Human traits outweigh technical expertise: study

09 SMEs prioritise on-site work over

concerns on health and well-being

HR BRIEFING 10 Expats deterred by Hong Kong's language requirements

LEGAL BRIEFING 12 What Asia's elite need to know about HK's new tax bill

MARKETING BRIEFING 14 Three key elements that fuel branded mobile app success

STARTUP

REAL ESTATE OUTLOOK OCCUPIERS, HOMEBUYERS GAIN LEVERAGE IN HK PROPERTY SLUMP

LUMINARIES

16 Innovative paint solution from Hong Kong promises global cooling

18 Hopebotics reduces frequent hospital visits for recovering stroke patients

SPACEWATCH 20 IWG’s unmanned co-working centre opens doors in Hong Kong

PROPERTY WATCH 22 Sun Hung Kai Properties’ hybrid

aparthotel caters to next-gen tenant needs

REPORT 24 Fibre coverage in APAC markets continues to expand

INTERVIEW 25 HK’s elderly housing shortage could tarnish city's global reputation 26 How HK firms can succeed in Southeast Asia

Published Quarterly by Charlton Media Group Pte Ltd, 2 HONG | JANUARY Q4 2023 287-299 2019 RoomKONG 1006,BUSINESS 10th Floor, 299QRC, Queen’s Road Central, Sheung Wan, Hong Kong

COVER STORY HIGH INTEREST RATES STALL FOREIGN PROPERTY DEALS IN HONG KONG

32 Hong Kong's top real estate agents under 40

INDUSTRY INSIGHT 38 More hotels pivot to co-living for

better margins and stable cash flow 40 HK scholars seek top finance jobs for work-life balance 42 E&M veterans need not fear generative AI – expert 43 Hong Kong's anti-job hopping rule seen to burden employment agencies 44 Manpower shortage casts shadow on local aviation industry’s recovery

COMMENTARY 46 The two thorns that are hurting Hong Kong's land resumption plan

48 A new reality bites as retail grapples

with consumer recessionary mindset

For the latest business news from Hong Kong visit the website

www.hongkongbusiness.hk

HONG KONG BUSINESS | Q4 2023

News from hongkongbusiness.hk Daily news from Hong Kong MOST READ

ARTS & LEISURE

Auction houses thrive on Asian millennials’ art-buying power Millennials have proven to be the new generation that paints a profitable path for auction houses. Last year, they were accounted for 34% of Christie’s, close to 40% of Sotheby’s, and nearly a third of Phillips’ buyers. In Christie’s recent Spring Auctions in Hong Kong, millennials accounted for 45% of all new buyers to the sales.

COMMERCIAL PROPERTY

BANKING & FINANCE

Hong Kong’s livi bank launches game-changing app for SMEs SMEs are often touted as amongst the most underserved segments by traditional financial institutions. And the case is no different in Hong Kong; hence, virtual-only bank livi’s newest product offering, the “livi Business” app offering a fully automated account-opening process that can be finished in just 20 minutes.

MEDIA & MARKETING

HEALTHCARE

HK reducing misuse of sick leave notes with digital certificate In Hong Kong, employees are only allowed a limited period to turn in a sick leave certificate, some as short as three days, which is why many have welcomed the Hospital Authority’s (HA) move to digitise their medical certificates. With this, employers need not wait for their employees’ medical certificates via mail or courier.

RETAIL

Phillips’ ‘minimalist’ HQ showcases diverse collection of Asia’s finest art

5 ways to ensure brand growth with micro-influencers

Jumppoint, the underserved market’s portal for deliveries

International auction houses usually operate on a pop-up model. For Phillips, however, that is no longer the case. In March 2023, the auction house opened its new Asia headquarters in West Kowloon. The six-storey headquarters has visitors hooked on checking the purposely built auction room.

Micro-influencers have been a favourite of brands, because they receive higher engagement. E-commerce platform Shopify, reported that 2023 is the year when brands tap more influencers with around 10,000 to 100,000 followers. For brands to ensure growth, marketing experts said they need to follow five rules.

As companies are busy doing what their competitors are also doing, Hong Kong-based startup Jumppoint does the opposite. Unlike other logistics platforms that offer quantity upon delivery, Jumppoint CEO and founder Samson Ho said they do it differently by using algorithms of their AI tech to plan the routes of their couriers.

HONG KONG BUSINESS | JANUARY Q4 2023 2019

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FIRST

Six in 10 consumers want to experience immersive dining (Photo from Deliveroo's "Snack to the Future" report)

How will Hongkongers dine by 2040 FOOD & BEVERAGE

magine sharing a meal with a king, a celebrity, or even a departed family member. Forty-two percent of Hongkongers believe such encounters will become reality in less than two decades, thanks to the advancements in AI. Deliveroo suggests that by 2040, the dining landscape will be "very different," reshaped by technology and altering how people discover and savouring their food. Their study revealed that 63% of Hongkongers wish to experience "immersive dining" and believe it could be a norm in the near future. If given the capability to smell and taste food before placing an order, 54% of Hongkongers expressed they would be more inclined to use delivery services. Beyond these transformative dining experiences, Deliveroo also forecasts a surge in the popularity of affordable tablet-based and liquid foods, such as Soylent, Huel, and other meal replacements, catering to those seeking more convenient food consumption options. Hongkongers (40%) are open and curious about transforming local dishes into

HONG KONG BUSINESS | Q4 2023

more accessible forms. "Popular food items such as dim sum, seafood, and street food are specifically mentioned as having the potential for easier consumption without the risk of spilling and ruining clothes," Deliveroo said. Another technology that will change the way Hongkongers consume food is AI and “BreathPrints". In fact, more than half of locals (55%) are already excited to see how “BreathPrints” can track and trace how healthy their meals are and what their bodies need. “At the moment, 87% of consumers find it challenging to maintain a healthy diet by themselves, and over one-third of them struggle with understanding what their body needs (37%) and knowing what foods are best for their personal goals (31%),” Deliveroo said. By 2024, most Hongkongers (81%) believe that it will be possible to create hyper-personal diets using AI technology that takes into

account biological, physical, and mental needs, such as sleep patterns, daily calorie requirements, and hormone cycles. Meanwhile, the report also predicted that “Me-ganism" will be the mainstream diet adopted by consumers in 2040 given that close to half of Hong Kong consumers have one or more dietary restrictions or preferences. Me-ganism is defined as a “diet which is fully bespoke to each individuals’ health needs.” Close to half of Hong Kong consumers have one or more dietary restrictions or preferences, indicating a growing demand for more personalised meal options. To support their diet, more than half of Hong Kong consumers (56%) would consider using a delivery platform more frequently if it could tailor meals to their individual goals, highlighting the need for more customised food services. According to Deliveroo, majority of Hong Kong consumers believe that the food they eat has a significant impact on their physical (78%) and mental wellness (69%). “By 2040, people will not only focus on achieving personal goals but will also expect meal delivery companies to fully tailor meals to their environmental needs and goals. Additionally, consumers will also be seeking more information about the food they consume, such as the sustainability credentials of the ingredients used in each dish,” Deliveroo said. Seasonal eating Deliveroo also noted seasonal eating could also become mainstream in 2040. "Grocery stores, meal delivery companies, and delivery-only kitchens could become seasonal first and only sell fresh produce that is in season locally," Deliveroo said. Meanwhile, the report also found that 75% of consumers in Hong Kong consider sustainability and environmental impact important when making food choices and 70% are willing to pay more for a meal that is good for the environment, reflecting the increasing desire for and inclination towards more sustainable food options. "With AI-powered personalised meal services, immersive dining experiences, and a strong focus on sustainability and environmental impact, the future of food looks exciting and promising for people in Hong Kong and beyond,” Nicholas Price, interim general manager of Deliveroo Hong Kong, said.

People will not only focus on achieving personal goals but will also expect meal delivery companies to fully tailor meals to their environmental needs and goals

HONG KONG BUSINESS | Q4 2023

FIRST 46% across APAC, and 42% globally. In terms of business viability, 42% of Hong Kong employees believe the company they work for will not survive more than a decade if they continue on their current path– 12 percentage points higher than the global average.

WHAT ARE THE 3 MAIN CHALLENGES FAMILY OFFICES IN HK FACE? FAMILY OFFICE

amily offices are being hindered from entering Hong Kong, given the city's complex and timeconsuming regulatory compliance related to investment management and financial reporting. Jim Kwok, vice chair of the Family Office Association Hong Kong, however, said the government’s recent policy statements on developing family office businesses in Hong Kong will allow the city to “facilitate the industry by simplifying the rules and offering comprehensive support measures.” Family offices in the city also struggle with attracting and retaining top talent. Kwok said family offices may not be able “to offer compensation packages that are as competitive as those offered by larger financial institutions.” “However, there are other factors that may make family offices more appealing to potential employees, such as the opportunity to learn about the family office industry, which is growing rapidly in Asia and globally, and to work for a mission-driven organisation that aligns with the values and goals of the family,” Kwok added. Organisational level challenges Apart from talent retention and regulations, family offices are also faced with multiple other individual challenges at the organisational level. “They need to achieve a balance between risk and return whilst ensuring intergenerational wealth transfer. They also need to establish effective governance mechanisms that align investment choices with the family's vision and values,” Kwok said. “They have to prepare for succession and continuity of the family office's leadership and management, especially when there is no clear succession plan, which is common for some newly wealthy families,” he added. Kwok, however, said that family offices in the city can address these challenges by accessing customized wealth-management solutions and using advanced technologies. 8

HONG KONG BUSINESS | Q4 2023

HK employers are putting more emphasis on the adaptability, collaboration, and critical thinking skills

Human traits outweigh technical expertise: study

mployers in Hong Kong are putting more emphasis on the adaptability, collaboration, and critical thinking skills of their employees than their technical skills. With technical skills getting less importance from employers, only 28% of employees in the city believe the skills their jobs require will change significantly in the next five years. Additionally, only 29% of Hong Kong employees say that their employers provide them with opportunities to apply new skills. “To address these issues, employers should create an environment with a stronger focus on applying future skills, and motivating highly-skilled employees in ways beyond monetary incentives,” PwC said in its Hong Kong Workforce Hopes and Fears Survey 2023. In addition, PwC found that Hong Kong employees reported lower levels of job satisfaction compared to their Asia Pacific and global peers. Less than four in 10 or 39% of the 1,000 employees surveyed from Hong Kong said that they are satisfied with their jobs. Whilst 3 percentage points higher than in 2022, this is much lower than the 57% of APAC and 56% on average globally that said they are satisfied with their jobs. Only 30% of the Hong Kong respondents said that they find fulfillment in their jobs. Hong Kong’s workforce indicated dissatisfaction with their compensation, with 35% indicating that they feel fairly compensated financially for their labour. This is lower than the average of

Michael Cheng

Albert Lo

Employers should create an environment with a stronger focus on applying future skills

Hybrid work and AI Hybrid working has become a prevailing work arrangement in Hong Kong, with 76% of employees surveyed saying that they have adopted a hybrid working model. This indicates that Hong Kong has a significantly higher share of employees working remotely, higher than the APAC average of 59% and the global average of 54%. Artificial intelligence is another hot topic amongst Hong Kong employees, and is viewed positively. About 4 in 10 (40%) expect AI to increase their productivity and efficiency. Almost 2 in 10, or 19% think that AI will not impact their job. “Fundamental shifts in the way we live, work, and interact with one another has necessitated that businesses adapt to new ways of operating, such as greater emphasis on digitalisation. Business leaders and employers are encouraged to experiment with different modes of working to support workplace flexibility, in addition to utilising AI, whilst increasing opportunities to upskill,” Michael Cheng, Workforce Lead Partner of PwC Hong Kong, said. Sustainability Meanwhile, the survey also found that almost half, or 43% of Hong Kong employees disagree and are indifferent over whether their employers have a responsibility to take action against climate change. “The workforce in Hong Kong still has a way to go on its journey of sustainability. ESG is increasingly central to companies’ strategic planning, brand, and culture. It creates value, strengthens stakeholder relationships, and mitigates risks, all of which affect the workforce,” Albert Lo, advisory consulting financial services leader of PwC Hong Kong, said. “Business leaders and employers are encouraged to promote awareness and understanding across ESG issues, consistently communicate the business strategy to ensure employees can confidently get on board for the journey,” Lo added.

FIRST

SMEs prioritise on-site work over concerns on health and well-being

workforce’s physical and mental wellness through various initiatives and benefits is key to the smooth running of other business activities,” Yu added. A little over half of SME employers were aware of the Employee Compensation Insurance (ECI) coverage – a legal requisite for all employers to ensure their businesses are protected in case of an unforeseen incident and provide affected staff with medical care. This is down from 67% in 2021. “Apart from providing wellness programmes and benefits that support employee wellbeing, having a comprehensive Employee Compensation Insurance (ECI) plan can help businesses protect themselves and provide affected staff with medical care in the event of accidents or incidents,” QBE undesrcored.

mployee wellbeing is increasingly taking a backseat in Hong Kong's small- to medium-sized enterprises (SMEs), with a recent study by QBE revealing that as a growing number of employers promote on-site work, the focus on the health and wellness of their staff diminishes. Results of the annual survey showed only 43% of SMEs in Hong Kong identified employee health, safety, and wellbeing as the most relevant environmental, social, and governance (ESG) issue to their business last year, dropping from 49% in 2021 and 50% in 2020. This was shown in decreasing wellness

Increased on-site work For this year, 63% of SMEs are expecting employees to work on-site, up from just 51% in 2022, whilst only about a fifth expect either work-fromhome or hybrid setups to continue. Employers were divided on the impact of requiring staff to return to office. The study showed about 40% of SMEs believe working from home or the hybrid setup have worsened the mental health of their employees, whilst at least a third saw these alternative working options beneficial to their staff. Commissioned by QBE Hong Kong, the survey polled 422 SMEs from various industries.

Lei Yu

A new study showed employers are expecting less WFH setups (Photo by Chris Montgomery from Unsplash)

HEALTHCARE

support given to the employees. According to the study, fewer employers are providing flexible working hours (31% vs 37% in 2023); care packages (27% vs 28% in 2021); and health and wellness benefits (26% vs 37% in 2021). “It is regrettable to see employee wellbeing becoming less important to Hong Kong SMEs. Whilst there are multiple challenges and risks employers need to manage every day, let us not forget that employees are a company’s most valuable asset and resource,” said Lei Yu, chief executive officer for North Asia and regional head of distribution at QBE Asia. “Taking action to support our

Having a comprehensive Employee Compensation Insurance (ECI) plan can help businesses protect themselves

TWO RECIPES FOR STAFFING SUCCESS FOR HK’S UNDERMANNED RESTAURANTS

ext time you go for a meal in Hong Kong, don't be surprised if the prices have gone up as most restaurants in the city are offering a 2%-5% pay hike to staff to beef up their manpower. According to Deliveroo's Restaurant Confidence Index, two-thirds (69%) of restaurants in the city are still hiring, whilst 86% said they still face difficulties in staff recruitment. To improve the staff recruitment, more than half of restaurants in the city (56%) offered a wage increase in Q2. Twelve percent of restaurants increased wages by 5-10%, and some (5%) adjusted wages by more than 10%. About half (41%) of restaurants believe support from delivery platforms can help alleviate their labour shortage problem. Apart from helping address their staffing problem,

restaurants said delivery platforms also help drive revenue, with 48% saying that these platforms contributed anywhere from 10% to 30% of their total revenue. Despite labour problems, F&B industry remains optimistic about their business outlook. Based on data from Deliveroo, two-thirds (69%) of restaurants expect an increase in revenues, or at least for revenue to remain unchanged this summer as Hong Kong welcomes the influx of tourists after the COVID pandemic. “The Hong Kong F&B industry's confidence may not be as high as anticipated, as restaurants continue to struggle with labour issues [but] it is encouraging to see restaurants welcome the first unrestricted summer holidays in over three years,” Yoko Fung, head of Account Management, Deliveroo Hong Kong, said.

Source: https://www.keytchens.com/deliveroo-lance-unnouveau-site-editions-a-courbevoie-ainsi-que-son-food-market/

HONG KONG BUSINESS | Q4 2023

HR BRIEFING recruitment practices “comply with relevant immigration, employment, and labour laws and regulations,” said Chui. “They should be aware of the new approval parameters like the qualified types of labour under specific schemes, quotas for the importation of labour for each scheme, manning ratio, providing additional training places of existing collaborative training programs for local labour, application period, and process, accommodation arrangement,” she added.

Many jobs in the local market will require Cantonese as a language but that’s a huge limiting factor (Photo by Yeexin Richelle from Shutterstock)

Expats deterred by Hong Kong's language requirements An HR expert advises firms to re-assess ‘baked-in’ job fit expectations.

any Hong Kong firms still fail to hire international talent despite relaxed immigration rules. The primary barrier? Language requirements. “A candidate of mine took on a new role. His role is to look at talent as part of their diversity programme and his first conversation with the talent function was to say, ‘why do so many of our job descriptions have ‘must speak Cantonese?’ The response was: ‘We don’t know, that’s just what it says on the job description,’” Mathew Gollop, managing director of Connected Group told Hong Kong Business. "Of course many jobs in the local market will require Cantonese as a language but that’s a huge limiting factor when we know that the local talent market is decreasing. If we’re looking outside of that, then we’re going to have to be more flexible on some of these language requirements,” Gollop said. What the HR expert is telling companies is that the key to taking full advantage of Hong Kong’s easing 10

HONG KONG BUSINESS | Q4 2023

They need to revisit the HR framework, and maybe some pre-existing things that have become outdated

Matthew Gollop

Lancy Chui

of immigration restrictions is to look long and hard at their talent needs and reassess the “baked-in” expectations of what the fit looks like for a role. “Organisations need to… look at what is the true demand,” Gollop said. “They need to revisit the HR framework, and maybe some preexisting things that have become outdated in order to identify where we can hire people from outside; and they need to state that more explicitly.” For Lancy Chui, senior vice president of Manpower Greater China, companies must also review their existing company culture and employee benefits to ensure that they remain competitive and attractive to foreign workers. “Offering competitive compensation packages, career development opportunities, flexible working arrangements, and a positive company culture can help create an environment attractive to talent from all over the world,” Chui said in a separate interview by Hong Kong Business. It is also important for companies to ensure that their

Induction immersion When hiring foreign talent, firms must also prepare for proper induction, which is key to successfully recruiting externally. “I think organisations — certainly if it’s not a big corporation — do not have a function internally that deals with mobility. Organisations need to be very conscious of the fact that there needs to be a soft landing for people,” Gollop said. “You need to make sure that they are supported through all of [the] changes that they’re going to need to go through, so that they can most effectively impact on your organisation in the shortest period of time,” he added. Citing studies, the HR expert said that it usually takes 12 months before somebody who relocates geographically can really positively impact an organisation, this is much longer than the period it takes for somebody who moved from one competitor to another in a single geography. “I think that period can be shortened, but you really need to focus on induction immersion,” Gollop said. “What organisations need to do is understand that when they are recruiting, they’re not just meeting a skill need. They’re bringing someone from another location that needs to be immersed into company and geographic culture, and they need to have something mapped out to handle that,” he added. Companies who wish to hire more foreign talent can take advantage of the government’s enhanced Quality Migrant Admission Scheme (QMAS) and Top Talent Pass Scheme (TTPS). To read the full story, go to https:// hongkongbusiness.hk/

HONG KONG BUSINESS | Q4 2023

LEGAL BRIEFING

What Asia's elite need to know about HK's new tax bill Experts say the city’s tax incentive regime is less stringent than Singapore’s.

igh-net worth individuals and affluent families in Asia are being lured back to Hong Kong with a new bill that offers tax concessions for familyowned investment holding vehicles (FIHV) and single-family offices (SFOs). The bill lays out different requirements for FIHVs and SFOs to be exempted from profits tax, said Alice Leung, partner at KPMG China who specialises on tax and private enterprise. Requirements One of the requirements both FIHVs and SFOs must meet to be eligible for the concessionary profits tax rate of 0% is that they should be managed or controlled in Hong Kong. At least 95% of the beneficial interests of the FIHV and SFO must also be held by the family. “This could be lower to 75% if the remaining 25% interest is held by approved charities in Hong Kong,” Leung said. “A tax-exempt charitable entity under the Hong Kong Inland Revenue Ordinance is allowed to hold up to 25% of beneficial interest, direct or indirect, in an SFO and/ or an FIHV without tainting the tax concession available to the FIHV,” explained Deloitte Private Hong Kong Leader Anthony Lau. Both the FIHV and SFO must also be managed by or controlled in Hong

A ‘non-taxexempt’ transaction would not taint the taxexempt profits from the other transaction

Alice Leung

Anthony Lau

Kong to be exempt from profits tax. SFOs must also be a private company, but can be incorporated in or outside the city. Other requirements which FIHVs must meet include having at least two full-time qualified employees and at least HK$2m (US$256,278) of local operating expenditure, which can also be outsourced to the SFO. There is no specific requirement on the qualification of the employees to be employed by the FHIV. SFOs, on the other hand, must manage specified assets owned by the family, through FIHVs, of at least HK$240m (US$30.75m), said Leung. Compared to other tax concession regimes, Lau said Hong Kong’s fund size threshold of HK$240m (US$30.75m) is “relatively low” in comparison to what is set out in Singapore’s Enhanced Tier Fund Tax Exemption Scheme under Section 13U of the Income Tax Act 1947. Under Singapore’s Section 13U regime, the fund size requirement is around HK$280m (SG$50m). SFOs are also required to have a local investment of at least 10% of the asset under management or HK$58m (SG$10m), whichever is lower. “The family office regime in Hong Kong has a low threshold regarding fund size and has no local investment requirement,” Lau said. Lau, however, underscored that

Hong Kong is working its way to becoming the preferred hub of high-net-worth individuals and affluent families in Asia (Photo by Manson Yim from Unsplash)

HONG KONG BUSINESS | Q4 2023

the tax exemption only applies to transactions in “specified assets.” These assets include investments in listed securities, futures contracts/ derivative products, and collective investment schemes. Private equities are also included, but “under certain conditions,” said Lau. Transactions incidental to the carrying out of tax-exempt deals may also qualify for exemption from profits tax, albeit subject to a 5% threshold. “Direct investments in crypto assets, insurance contracts, antiques, art pieces, wine, etc. would not qualify as ‘tax-exempt’ transactions outright,” Lau said. “In any case, a ‘non-tax-exempt’ transaction would not taint the tax-exempt profits from the other transactions,” he added. Challenges SFOs who wish to enjoy the profits tax concession the Hong Kong government is offering may have to undergo “restructuring,” said Lau. Citing an example, Lau said: “If an FIHV currently employs in-house investment professionals to manage the FIHV’s assets, it may need to create a separate SFO to employ those investment professionals.” “If they intend to rely on the tax concession, they may have to revisit their current corporate structure and operating model, and review and maintain proper documentation to support their tax-exempt status,” he added. The Deloitte expert also advised SFOs to study the regime carefully and seek professional advice whether they could enjoy the tax concession. “The law contains various provisions imposing requirements on FIHV, SFO, types of transactions that can qualify for tax concession, etc. and with certain anti-round tripping and anti-avoidance provisions as well. Its interpretation and application may not be straightforward, and the devil is in the details,” he said. There are also parts of the scheme that need further clarification, including “how the thresholds for the substance requirement should be determined if there are multiple FIHVs in a SFO structure,” said Lau. To read the full story, go to https:// hongkongbusiness.hk/

WINNER

BEST HOME THEATER

HONG KONG BUSINESS | Q4 2023

MARKETING BRIEFING

Three key elements that fuel branded mobile app success

Amongst them is introducing rewards which led a retailer to 500% sales growth.

etailers developing or already have a branded mobile app often grapple with achieving high adoption rates, which experts say can be addressed by incorporating three key features.

Loyalty, rewards programme If there is one feature that retailers cannot miss when creating their own apps, that is integrating a loyalty and rewards programme. “Rewards and loyalty programmes are very important features that require consumer adoption and keep consumers engaged with brands over time,” June Lau, research analyst at Euromonitor International-Hong Kong, told Hong Kong Business. “Hong Kong people love rewards or any benefits that give them the edge and they are willing to adopt and use apps for the benefit," Lau added. SHOPLINE Hong Kong Deputy General Manager Nick Chiu impressed upon the same insight, noting that integrating a loyalty programme in the app can help in client relationship management. SHOPLINE, which is a commerce SaaS (Software-as-aService) and solution provider that helps merchants build their own omnichannel platform including branded mobiles apps, has an in-built loyalty programme which retailers can design. It is capable of creating different tiering structure levels. One of SHOPLINE’s merchants — GopopStation, which sells contact lenses — has seen the benefits of introducing rewards in a shop app. During the Chinese New Year Season, GopopStation founder Vivian Wu said she sent out HK$18(US$2.30) red packet shopping credit, which symbolises fortune in Chinese, for customers who use the app. “We have received exceptional interest in the [app] and saw a record 500% growth in sales during that period which is very significant,” she added. Personalisation Apart from rewards and discounts, 14

HONG KONG BUSINESS | Q4 2023

June Lau

Nick Chiu

Vivian Wu

consumers shop in mobile apps for a personalised shopping experience. This is something mobile apps can provide since retailers can have access to personal data of their customers as opposed to partnering with thirdparty operators (3POs). “3POs usually do not provide customer data back to retailers due to protections and privacy of personal data. However, these days it's very crucial for businesses, through data, to understand more about consumer behaviours, make better business decisions, and tailor products and services according to customer preferences,” Lau explained. Echoing this sentiment, Chiu stressed that owning customer data allows merchants to devise marketing strategies and in turn, create a more personalised experience for their patrons. Channels linkage The effectiveness of a branded app is also determined by how seamlessly it facilitates merchant operations, which is why Lau and Chiu advised retailers to ensure that their mobile platform is linked to their other channels whether it be a website or an offline store. By doing this, Chiu noted retailers can give consumers the option to fulfil

their orders the way they want to. SHOPLINE also offers this feature to its partner merchants. “You can use the app to make the purchase but consumers can choose either to pick up their order from offline stores,” he said. Lau said such a feature is important, especially for brands involved in the food services industry. “They should provide online pickups, or takeaway, or maybe online reservations,” she said. Wu, for her part, said having her app integrated with her website helps her reduce maintenance costs. “I don’t need to upload new products to the website and then do the same thing to the app,” Wu said. Maintaining a mobile app Apart from updating the product roster, Wu said the only maintenance work she does for her GopopStation’s app is updating its design and visuals. “I only spend three hours per week maintaining the app,” Wu said — just to make sure there is an easyto-use layout for her customers. “We have put in a search option as well as categories to help customers choose from our over 3,000 lenses.” Meanwhile, Chiu said SHOPLINE helps its partner merchants maintain their apps not only on the technical side like fixing bugs, but also incorporating changes based on user feedback. Knowing customers’ wants and needs generally is important when building an app altogether, said Lau.

Having app integrated with website helps reduce maintenance costs (Photos from GopopStation)

HONG KONG BUSINESS | Q4 2023

STARTUP

Innovative paint solution from Hong Kong promises global cooling i2cool's technology helps buildings reduce surface temperature by 40°C, allowing a 42% energy saving.

hat started as a university project is now helping cities and countries reduce their electricity use and carbon emissions. Martin Zhu, co-founder of i2Cool, began the startup when he was taking up his doctorate studies at City University of Hong Kong (CUHK). Through the university’s HK Tech 300 programme, Zhu was able to develop a technology capable of refracting solar energy back and dissipating heat from the earth out to the universe. Zhu then applied the technology to paint and created a product that can cool down the temperature of buildings or surfaces where it is applied. What makes i2Cool’s iPaint different from other heat insulation materials in the market is its high solar reflection. The startup’s technology can also emit the radiation with 8-13 micron metres like mid-infrared for cooling. “Our material can reduce the surface temperature by more than 40°C. For the indoor temperature, we have reduced it by more than 10°C,” Zhu told Hong Kong Business. For comparison, Zhu said other cooling materials can only reduce temperature by 4°C to 5°C. Solar reflectivity and cooling One of the buildings that used i2Cool’s cooling paint is the Guangzhou Huashang College. More than 7,000 square metres of its roof was coated with iPaint in December 2022. By February 2023, outside surface temperature of the building had been reduced by 42.9°C from 63.5°C. The reduction in temperature has resulted in total electricity savings for the build of 2,629,096.80 kW-h per year, electricity cost savings of CNY1,630,040.02 (US$223,682) per year, and carbon emission reduction savings of 2,366.19 tonne per year. Towngas, the Hong Kong and China Gas Company, has also used iPaint for the back and framework of its solar panels. By doing so, the 16

HONG KONG BUSINESS | Q4 2023

Martin Zhu, co-founder of i2Cool

Our material can reduce the surface temperature by more than 40°C

public utility company was able to increase the power generation efficiency of its solar panels by 8%. Solar reflectivity or cooling is one of the two functions of i2Cool’s cooling paint. The other function of the paint is thermal insulation. “We can convert internal thermal energy of the earth into emission which can then be dissipated out to the very cold universe,” Zhu explained. He said the idea of radiative cooling or electricity-free cooling actually came from Saharan silver ant which was amongst his inspirations when he was building the technology. “These ants live in the Sahara Desert under a very hot temperature of like 70°C to 80°C because they have a special skin structure that can convert the body energy into an emission and then the animal can just dissipate the body heat into the universe,” Zhu said. Painting a cooler future This technology in i2Cool has made its way to the roofs of many buildings in Hong Kong, with Zhu’s tartup currently involved in more than 60 projects in the city. Outside Hong Kong, Zhu is eyeing the Middle East to become one of its biggest markets. So far, i2Cool has already collaborated with Emaar Properties, one of the largest

property developers in the United Arab Emirates (UAE). Through the collaboration, Emaar Properties will use iPaint for the roofs of their projects, particularly shopping malls. Regarding their product lineup, Zhu shared that his team is already in the process of developing a colorchanging cooling paint, along with ceramic cooling solutions and paint applicable for automotive use. “Our material actually has some very diverse nanoparticles. We can adopt it into car paint that can be sprayed on the metal framework of the car,” he shared. Zhu added that these products have undergone R&D already and they are just looking for a manufacturer who they can collaborate with for the production. With a HK$20-m (US$2.5-m) funding, Zhu said he plans to increase its manufacturing capacity. Currently, i2Cool can produce 3,000 tonnes of paint per year which is enough for 8 million square metres of space. “One of the challenges in Hong Kong is that the landfill here is quite concentrated and we don’t have enough space to do a large scale production, that’s why we have built a factory in GuangZhou in the Greater Bay Area and is 100 kilometres away from Hong Kong,” he said.

INNOVATOR OF THE YEAR - LOGISTICS

Pursuing Digitalisation in Logistics through the Rhenus Innovation Hub

The platform aims to accelerate the digitalisation of logistics to increase efficiency, provide flexibility and offer smart solutions to meet evolving customer needs.

eading global logistics service provider Rhenus Group established the Rhenus Innovation Hub in Hong Kong with the vision to create shared value and build a digital driven future for logistics in Hong Kong, China and beyond. To achieve this vision, the Innovation Hub aims to provide new technology-based logistics solutions, such as using AMR technologies, and make use of the Innovation Hub as an ideation platform for creating different logistics solutions for the long term. Established in 2002, Rhenus Hong Kong has a strong portfolio of supply chain solutions, including warehousing, distribution, and lastmile delivery. Rhenus Hong Kong is committed to providing a high standard of service to its customers in industries such as consumer goods, fashion & lifestyles, healthcare, medical devices, electronics and automotive. One of the world’s fastest-growing industries, the global logistics sector is estimated to reach a value of USD 16.4 billion by 2026*. Looking ahead, the Rhenus Innovation Hub aims to be the preferred partner for start-up companies, tertiary institutes, government organisations, and the community. Bringing its vision of accelerating logistics digitization, the Hub is working towards being an industry pioneer to develop optimized and scale-able logistics solutions. Logistics solutions that grow with customer needs The needs of today's companies vary, and a flexible solution is needed to support more customers with their orders, including smaller quantities, and to help customers manage their logistics costs as well. Keeping abreast of trends to stay relevant in the logistics industry, the Rhenus Innovation Hub is a leading player in the fields of robotics, IoT, AI, and warehouse automation. The Rhenus Innovation Hub is both an organisational ideation platform for finding optimised and saleable logistics solutions and a platform for linking community, education institutions, and start-up companies. Technology and innovation have no boundaries, and the Rhenus Innovation Hub provides a flexible way for companies and clients to do POC (Proof of Concept) projects and co-development.

Co-creation with partners and customer With the support of Rituals, one of the leading cosmetics and beauty companies from the Netherlands, Rhenus introduced AMR (Autonomous Mobile Robot) The Rhenus Logistics team with their HKB Management Excellence Awards trophy solutions. Now, for various intralogistics Redefining sustainable logistics workflows that would have conventionally For its warehousing solutions with the Rhenus been done manually, from manual transport Innovation Hub, Rhenus won the Innovator procedures to partial activities in extensive of the Year – Logistics Award at the 2022 picking processes are now automated. HKB Management Excellence Awards. These The robots are designed to complement innovations have redefined and created employees at the warehouses and can scalable and efficient logistics processes. minimise occupational risk for these ”Digitalisation is not a project, but employees. By automating monotonous a process, and we are committed and repetitive processes such as loading, to incorporate technologies in our unloading, and stocktaking, the AMRs warehousing solutions. Through the Rhenus are able to free up employees to handle Innovation Hub, we hope to connect the more complex tasks. They are also easily world through logistics,” said Dennis Mak, integrated into warehouse systems, as they Director of Warehousing Solutions & are able to use AI and machine learning to navigate around the warehouses. Distribution of Rhenus Greater China.

Rhenus Logistics deploys Autonomous Mobile Robot solutions

Digitalisation is not a project but a process, and we are committed to incorporate technologies in our warehousing solutions 1

Source: *New York (US), April 25, 2023 (GLOBE NEWSWIRE) -- Logistics Market Overview) HONG KONG BUSINESS | Q4 2023

STARTUP

Hopebotics reduces frequent hospital visits for recovering stroke patients With the use of the device, patients will only need to visit hospitals weekly instead of monthly.

ehabilitation for elderly stroke patients typically requires five to seven days in the hospital, an experience made even more overwhelming given the current staff shortage in Hong Kong hospitals. According to data from Health Care Manpower Projection, Hong Kong faced a significant shortage of 3,405 nurses in 2020, which could rise to 5,060 within 20 years. Recognising this challenge, Hong Kong-based startup Hopebotics developed HandTasker, a device that can facilitate patients' recovery at home and without frequent hospital visits. Raymond Tong, the co-founder of Hopebotics, said hospital visits would be reduced from weekly to monthly using the device. HandTasker utilises a flexible actuator and 3-D printing technology to fit the soft-hand robot with natural hand movement, assisting the elderly in doing easy and lightweight tasks essential for stroke patient rehabilitation, such as picking up a phone, writing, or grabbing food. "The elderly still can be independent, if they can recover better from therapy and they can still live a normal life," said Tong. The device is also customisable and can accommodate patients with different hand sizes and stiffness levels. To support the hospitals and therapists in tracking the patient's condition, the HandTasker comes with real-time muscle spasticity monitoring, helping the healthcare staff from hospitals to monitor the progress remotely. Promoting HandTasker To promote the use of the HandTasker, Hopebotics has collaborated with hospitals in the rehabilitation of stroke patients. Currently, the startup is actively working with non-government organisations, the Hong Kong Stroke Association, and the Pamela Youde Nethersole Eastern Hospital in Chai Wan, Hong Kong. Hopebotics blends “hope” and “robotics” since their company enables 18

HONG KONG BUSINESS | Q4 2023

The device is also customisable and can accommodate patients with different hand sizes and stiffness levels (Photo from Hopebotics' official website)

The elderly still can be independent, if they recover better from therapy and can still live a normal life

stroke patients to lead healthy lives despite their age. Tong, a biomedical engineer, alongside his co-founders Zheng Li and David Shi, started Hopebotics Co. Ltd. to provide the latest soft wearable robotics for stroke rehabilitation. Before they could create the lighter robot hand for stroke patients in 2012, Tong had already made a robotic system for rehabilitation known as the Hand of Hope. But this device was too heavy for his target market — elderly patients. What the trio developed years later was the use of lighter materials for the robotic hand device. The latest version of the HandTasker is only about 150 grams. Healthy ageing The World Economic Forum forecasts that by 2050, over 40% of the population of Hong Kong, South Korea, and Japan will be 65 years old and above. These countries also represent the three markets with the largest elderly population in the world. Tong, who supports elderly living

globally, said the goal for the next generation is to keep people healthy through technology. “Everyone’s enjoyed their life and everyone can enjoy good health, even if they are at the age of 80 or 90,” said Tong. Next tech: ExoMuscle Tong said they have developed another robotics tech to rehabilitate those with shoulder or walking problems. This new type of tech is called ExoMuscle, a bionic artificial muscle like the structure of a skeletal muscle but surpassing it in terms of stress, strain, power density, and efficiency. The tech can lift a 20-kilogram water bucket. ExoMuscle is also adjustable, achieving variable actuation stress of up to 0.9 MPa. This capability makes it suitable for use in various joints and muscles of the upper limbs. Tong said the ExoMuscle can also be customised to meet the needs of different stroke patients during rehabilitation.

FINTECH - BANKING

Enabling SME Growth Through Alternative DataDriven Trade Financing

By Sandy Tan, Head of Ecosystems, Institutional Banking Group (DBS Bank Hong Kong)

DBS Hong Kong franchise has launched first-in-market partnerships

n 2019, DBS Group launched its ecosystem strategy as a means of embedding our products and services into our partners’ platforms. The logic behind the move was that not only we could create a more seamless and invisible journey for our customers, but also we could leverage alternative data sources to reduce the reliance on traditional financial data. Fast forward to 2023, our DBS Hong Kong franchise has gone on to launch first-inmarket partnerships with leading players in e-commerce, logistics and trade – creating innovative financing journeys for SMEs and receiving global recognition from publications such as The Asset and Global Finance. However, despite the re-opening of Hong Kong and China borders this year, many small business owners in the Greater China region have continued to face challenges in securing sufficient working capital to sustain their day-to-day operations. One of these challenges lies in the labour-intensive and time-consuming process that are needed when applying for trade financing from a bank.

Sandy Tan, Head of Ecosystems, Institutional Banking Group (DBS Bank Hong Kong)

Traditionally, enterprises are required to manually gather, organise, and submit numerous documents for banks to review – including purchase orders and invoices. What’s more, banks often demand assets owned by companies or owners as collateral for loans. Given that SMEs typically have limited resources and manpower at their disposal, applying for trade finance can become a significant hurdle – impeding their ability to access the necessary working capital crucial for sustaining operations and facilitating business growth. Streamlining Trade Financing Amidst the pandemic, enterprises expedited their digital transformation efforts. Suppliers capitalised on the latest e-commerce platforms to streamline order placements, shipment management, and payment processing, especially when their staff had to work from home. This development has provided an opportunity for banks to leverage alternative data, paving the way for innovative trade financing solutions. These solutions aim to reduce the burden of paperwork and collateral requirements, resulting in increased flexibility and improved accessibility for small business owners seeking financing. E-commerce generates a substantial volume of transactional data. By leveraging alternative data sourced from e-commerce platforms, such as purchase orders and shipment information, banks can assess the financial health of enterprises and preapprove credit lines. SMEs can seamlessly apply for trade financing online, effectively eliminating the manual processing of numerous documents for loan applications. This innovative trade financing solution not only streamlines the application process but also does so in a cost-effective manner. Furthermore, as a pioneer and leader in digital banking, DBS has collaborated with prominent industry players to provide

innovative financial solutions based on alternative data. In Hong Kong, DBS has partnered with GS1 Hong Kong (GS1 HK) to offer trade financing through GS1 HK’s ezTRADE Order-to-Cash platform. Driving Digital Transformation in SMEs SMEs can now apply for trade financing online precisely when they need more working capital, as opposed to taking out loans in advance. By harnessing the platform’s trusted data and leveraging DBS’ digital capabilities, SMEs can secure trade financing within the same day. This paperless approach to trade financing not only relieves SMEs from repetitive document submissions but also provides up-to-date business performance and lays the foundation for more digital and sustainable business practices. This advantage is particularly beneficial for fast-moving consumer goods (FMCG) and food & beverage (F&B) companies, which frequently operate within a rapidly evolving market environment. An illustrative example is Come-in Enterprise, a supplier of quality seasonings and gourmet products in Hong Kong. Over the past three years, Come-in has witnessed a surge in demand for its food products. However, the operational disruptions resulting from the pandemic-induced supply chain disruptions and manpower shortages posed significant challenges. With the trade financing solution from DBS, Come-in was able to swiftly and seamlessly acquire the necessary working capital to sustain its operations and foster continued growth. DBS also collaborates with leading logistics companies, including JD Logistics and Cainiao, to extend supply chain financing services to Hong Kong-based SMEs participating in the cross-border e-commerce import sector. These SMEs import goods from international markets and subsequently retail them onshore in China. Amongst the favoured merchandise are baby care items, fashion products, nutritional supplements, and electronics. Given the transition to online shopping, innovative trade financing solutions based on alternative data significantly enhance the cash position for e-commerce merchants, empowering them to cater to the escalating demand from Chinese consumers.

By harnessing the platform’s trusted data and leveraging DBS’ digital capabilities, SMEs can secure trade financing within the same day HONG KONG BUSINESS | Q4 2023

SPACE WATCH

IWG’s unmanned co-working centre opens doors in Hong Kong The flexible workspace brand was previously available only in Japan and Korea.

imilar to global chain Anytime Fitness, which has gyms without staff, a brand of co-working space from Japan and Korea is launching in Hong Kong without the usual trimmings, such as reception areas and staff. IWG's OpenOffice, having a self-service workspace model, opened in Hong Kong in June. The spacious 8,000-square-foot facility is located at 60 Gloucester Road in Wan Chai. The Open Office has no reception services and all office spaces, virtual offices, and meeting rooms in the building

Paul MacAndrew

are unmanned, making it a self-service and “manless” location. So, clients who wish to book spaces in the centre can do so through IWG’s digital platform. Paul MacAndrew, country manager for IWG in Hong Kong & Greater Bay Area, said OpenOffice is perfect for organisations that just want a flexible workspace. Outside the rooms, however, there are small waiting areas as well as a pantry. “We’re trialling this in the market. Within the first few weeks, we already sold over half of the inventory within that location,” MacAndrew told Hong Kong Business.

1 OpenOffice has

smaller office spaces compared to HQ and Regus

2 The pantry of

IWG's first ever OpenOffice in HK

3 Employees taking

a break can sit at waiting areas

4 The lobby of the

OpenOffice in Wan Chai

5 A look at one of

the office rooms in Open Office

in 6 Spaces OpenOffice is perfect for organisations that do not need common facilities

HONG KONG BUSINESS | Q4 2023

PROPERTY WATCH: TOWNPLACE

Sun Hung Kai Properties’ hybrid aparthotel caters to next-gen tenant needs TOWNPLACE WEST KOWLOON offers incredibly flexible lease terms in a modern and upbeat community.

TOWNPLACE WEST KOWLOON Facade (Photo from Sun Hung Kai Properties)

The "trio" unit (Photo from Sun Hung Kai Properties)

CMY

The deluxe one-bedroom unit (Photo from Sun Hung Kai Properties)

The deluxe studio unit (Photo from Sun Hung Kai Properties)

est Kowloon may not be the first choice of young professionals seeking accommodation, but Sun Hung Kai Properties' new aparthotel, which offers short-term leases and an array of on demand hotel-like services, has the potential to change this perception. TOWNPLACE WEST KOWLOON (TPWK) is an 843-unit aparthotel tailored for young professionals, offering individual layouts, mostly studios and one-bedroom as well as options of two-to three-bedrooms. The size of units ranges from 243 square feet to 860 square feet. For studios and one-bedroom, the monthly rent starts at HK$13,800 (US$1,763) and HK$18,800 (US$2,402), respectively. For two-bedroom and three-bedroom units, rent starts at HK$30,800 (US$3,935) and HK$52,800 (US$6,746) monthly, respectively. The development was established with the help of the interior design experts at Conran and Partners and architectural firm, LAAB. Hybrid concept “Aparthotel is the exact answer to the modern needs of young professionals that does not rigidly define the space, but combines the good side of both apartment and hotel — that’s what we call a hybrid concept,” TOWNPLACE (TP) Deputy General Manager Elee Lee told Hong Kong Business.

HONG KONG BUSINESS | Q4 2023

Flexibility to every extent — lease terms, designs, and on-demand services, allows millennials to choose what they want

“Flexibility to every extent — lease terms, designs, ondemand services, etcetera — allows millennials to choose what they want. Flexibility is definitely our edge,” Lee added. The TOWNPLACE features that make it attractive to young professionals include a hybrid short- and long-term leasing model and hotel service on-demand options. Lee revealed that TPWK offers flexible leases from mere days to months, and even years. Apart from flexible leases, the TOWNPLACE development also offers a “trio” unit which is designed for tenants who value “togetherness and privacy.” “Each of the three private bedrooms is connected to a spacious shared living room area, providing the perfect balance of comfort and socialisation. It is perfect for a group of working buddies or partners who want to stay close together whilst still enjoying their own private space,” Lee said. The development also prides itself on the “Community.” The development has a comprehensive clubhouse as well as a common area where tenants can socialise. “Young professionals need a socialising platform for them to get together and to build something greater. They look for a dynamic and quality lifestyle as well as a platform allows that them to have social and business networking, We name it as ‘Blesisure’ lifestyle,” Lee said.

HONG KONG BUSINESS | Q4 2023

REPORT: TELECOMMUNICATIONS

Fibre coverage in APAC markets continues to expand In the region, Hong Kong is one of the markets that have established a marketwide fibre backbone.

T APAC

he Asia-Pacific (APAC) region continues to expand fibre coverage in emerging markets after optical fibre networks in the area reached most households— exceeding the 500-million mark as of year-end 2022. According to Kagan data, the total fibre broadband subscription in APAC translates to 85.1% share of the entire residential fixed-line broadband subscriber base. However, fibre broadband service take-up rates remained below 50% in most of the markets which suggests that the utilization of the fibre infrastructure was still far from saturation in the APAC region. Mainland China and India led the fibre optic cable deployment mileage among developing markets in the region in the past years. China boasts a total length of 59.6 million kilometres of fibre lines installed, and Kagan estimates that fibre broadband subscribers will account for at least 90% of total broadband subscribers in the mainland by the end of 2027. China Mobile Ltd. led the fibre initiative with an estimated 19.4 million kilometres of fibre cables deployed.

Hong Kong and Taiwan are also key global fixed-line communication nodes which led to multiple submarine cable projects across the countries

In India, Reliance Jio Infocomm Ltd. surpassed all other FTTH providers within two years of its launch with more than 7.6 million FTTH-connected residences by yearend 2022—cementing its position as a market leader. Bharti Airtel Ltd., the second-largest fixed broadband operator in India, also expanded its FTTH footprint across more than 500 new towns in 2022. Hong Kong and Taiwan have both established marketwide fibre backbones, totalling less than 20,000 kilometres of fibre optical lines deployed as of end-2022, combined, based on Kagan's estimate. The two markets are also key global fixed-line communication nodes which led to multiple submarine cable projects across Hong Kong and Taiwan. Markets with a high share of fibre-to-the-home (FTTH) service subscriptions, such as Japan, South Korea, Singapore and Vietnam, have also been expanding fibre coverage to remote areas and upgrading fibre transmission speed. Japan and South Korea, which were early movers in fibre network adoption, are focusing on speed improvement and power saving of

Asia-Pacific FTTH summary

HONG KONG BUSINESS | Q4 2023

long-distance signal transmission with upgraded network infrastructure. In Singapore, NetLink NBN Trust, the sole fibre network builder in the country, reported 1,584,124 homes passed as of June 2023, pushing more fibre network infrastructure to enhance the enduser experience. NetLink's customers and Singapore's major ISPs Singapore Telecommunications Ltd., StarHub Ltd., and M1 Ltd. currently offer fiber broadband plans with download speeds of up to 2.5 Gbps and upload speeds of up to 1.25 Gbps. In Vietnam, major ISPs Vnpt Ltd., Vietnam Military Telecoms Co., and FPT Telecom Joint Stock Company have reached more than 18 million fibre customers in total by yearend 2022. The market's fibre optic system uses Synchronous Digital Hierarchy (SDH) and Dense Wavelength Division Multiplexing (DWDM) to transmit a high volume of data across Vietnam. Increasing fibre broadband services Meanwhile, the rest of Southeast Asian markets, particularly Indonesia, Thailand, Malaysia, and the Philippines intend to increase their fibre broadband service take-up by selling prepaid fibre-to-home packages and 5G building packages. Indonesian telcos have begun to boost fibre broadband technology adoption while simultaneously enhancing the 5G network. As of year-end 2022, Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk had upgraded its copper-based connections in 459 cities and districts to fibre, achieving its 2020 objective of passing 37 million residences. The Philippines' largest telco, PLDT Inc., had 17.2 million homes passed as of the first quarter of 2023. The telco has been actively rolling out fibre lines and deploying fibre ports since 2015, aiming to make the Philippines a fibre-powered market. Incumbent fixed broadband player Converge Information and Communications Technology Solutions Inc. had 15.1 million homes passed, reaching major localities in the first quarter of 2023. Malaysian ISPs are supported by the local government's digital infrastructure project. To read the full story, go to https:// hongkongbusiness.hk/

INTERVIEW

HK’s elderly housing shortage could tarnish city's global reputation JLL warns that the city could face a potential shortage of elderly places by 2032.

ong Kong’s competitiveness is at risk of being tainted if the city fails to address its elderly housing gap. JLL warns that, with the elderly population projected to reach 2.2 million by 2023, Hong Kong faces a significant infrastructure shortfall. To address this impending issue, the city must build around 6,000 more elderly residential places annually for the next 10 years. Tom Parker, institutional clients director of Value and Risk Advisory at JLL Hong Kong, said the city currently only builds 30,000 to 40,000 elderly places yearly. “To be able to build 6,000 additional senior residential places each year will be a rather significant challenge and may not be possible, but by aiming towards that, at least we can go some way towards tackling the problem,” Parker told Hong Kong Business. “We’ve got a really big gap at the moment in terms of how much elderly housing we have available. That's a gap that we really need to start to bridge in order to develop the sector further and provide suitable housing for our senior population,” he added. Currently, Hong Kong also only has 39 elderly places for every 1,000 senior residents which is one of the lowest ratios amongst developed markets. In other developed markets, the ratio is 60 to 70 every 1,000 residents. A solution to a decades-old problem? Parker acknowledged that addressing the needs of the senior population can relieve some of the pressure that Hong Kong faces overall in terms of its housing shortage. “If we fail to address the shortage, then ultimately, the biggest risk is we will further exacerbate our existing housing crisis,” he said. “We can help to relieve a lot of that strain on the housing shortage by creating or building more senior living facilities, building more elderly homes, as the current housing shortage ultimately impacts upon the competitiveness of Hong Kong.” The JLL expert said that elderly residents globally want accommodation or facilities which are more suited to their needs and which can create a sense of community. “At present, elderly residents who may wish to move into such a facility may not be able to do so because the facility doesn’t exist or because there’s no space in the existing facilities. So what we ended up with was a large number of private and public housing, which continues to be occupied by elderly residents,” Parker said. “Rather than [public and private] housing coming back onto the mass market to create further homes for families and young people, we ended up with a large amount of our existing housing stock being tied up with a population for whom that housing stock may not be best suited,” he added. Aspirational living In terms of location, Parker said developers can consider Kwun Tong and Tuen Mun especially for traditional elderly housing, otherwise known as nursing homes or residential care homes for the elderly in Hong Kong. Parker, however,

Tom Parker, institutional clients director of Value and Risk Advisory at JLL Hong Kong

If the housing crisis is left without solutions it will eventually erode Hong Kong’ overall competitiveness

underscored that there’s a demand for elderly housing across most of Hong Kong at the moment. For Senior Living developments, which often target the wealthier senior population, the best locations would be Hong Kong Island and Kowloon Tong. Senior Living is a concept of providing “aspirational” housing for the elderly population. “The idea of senior living is to provide something, which is more attractive to the senior population. Some of the features that really set senior living apart can be items such as flexible medical care,” Parker said. Other features that senior living places have include leisure facilities such as cafes and restaurants, or cinemas and gyms. “[Senior Living] is all about making space in which the elderly population can come together within a senior living facility and really spend quality time to get that sense of community,” Parker explained. “We’re also seeing a lot in the way of the adoption of technology within senior living facilities globally. That can range from technology, which measures the overall air quality and temperature within a flat to technology that can check slips and trips within a flat and check the residents vital signs to make sure that they’re healthy,” he noted. Parker reiterated the importance of building special facilities that will meet the elderly's needs, saying that with these places Hong Kong can free up some accommodation and somehow address the city’s housing crisis. HONG KONG BUSINESS | Q4 2023

INTERVIEW

How HK firms can succeed in Southeast Asia

SG, Thailand, Vietnam, and Malaysia top local firms’ preferred destinations for expansion.

thriving Chinese manufacturing company accustomed to 24-hour work shifts may face challenges when expanding its operations in Southeast Asian countries, such as Vietnam and Malaysia, where the local workforce is not as receptive to round-theclock work schedules. Ricky Ng, head of Wholesale Banking at UOB Hong Kong, highlighted this as he talked with Hong Kong Business about four essential criteria firms must consider to navigate SEA successfully. Data from UOB’s Business Outlook Survey showed that 73% or more than seven in 10 companies in Hong Kong are now interested in expanding their operations overseas. "If you are taking the same approach in China to run a factory in SEA, that is not workable,” Ng underscored. Key motivators for expansion The key motivators for Hong Kong firms to expand are to improve their profit (70%), build an international reputation (50%), and grow their revenue (50%). Other reasons cited by firms to expand overseas are to leverage their network (42%), take advantage of government policies in their selected markets (38%), reduce risks (34%), and seek opportunities for their products (16%). When expanding their businesses to foreign markets, firms often encounter various challenges. These challenges can include a lack of essential support structures like legal, regulatory, compliance, and tax assistance (40%), a shortage of in-house talent and experts to facilitate their expansion (38%), and insufficient financial support or funds (37%). These challenges, however, may not be as pronounced in certain Southeast Asian countries, specifically in Singapore, Thailand, Vietnam, and Malaysia. Data from UOB showed that of the four, Singapore is the most preferred expansion market of Hong Kong firms, with 56% expressing interest in the country. Amongst the benefits Hong Kong firms can take advantage of is Singapore's extensive network of double taxation treaties. “Singapore [also has a] regulatory framework that is well-developed, providing strong protection for investor and business aligned,” Ng added For the local firms eyeing Thailand as a new home, Ng said they can take advantage of the country’s array of investment schemes. Ng noted Thailand will be a good market for car manufacturers since the country is also known to be one of SEA’s manufacturing hubs. “Thailand provides tax incentives and has streamlined their procedures for qualifying projects. To add, Thailand has a well-developed legal system and regulation to protect investors and businesses,” Ng added. When venturing into Vietnam, Ng said HK firms could likewise enjoy the country’s various investment incentives, 26

HONG KONG BUSINESS | Q4 2023

Ricky Ng, head of Wholesale Banking at UOB Hong Kong

including tax exemptions, reductions, and preferential rates for specific industries or projects located in certain regions. “[Vietnam] also provides an incentive for investment in technology, research, and development,” Ng said. “The government has focused a lot on simplifying its administrative procedures, reducing barriers, and enhancing the ease of doing business in Vietnam.” The UOB head of wholesale banking said Vietnam would be a good market for companies in the electronics industry, noting that UOB has helped a company belonging to the electronics segment to expand its factory capacity there through working capital financing.

If you are taking the same approach in China to run a factory in SEA, that is not workable

"Hot country" In Malaysia, Hong Kong firms can take advantage of its tax incentives, particularly the pioneer status and investment tax allowance. “Malaysia has established organisations such as the Malaysian Investment Development Authority or MIDA and the Malaysia Digital Economy Corporation, to facilitate investment and provide support to foreign businesses,” Ng said. “These agencies have a streamlined procedure incentive and assistance to companies seeking to establish operations in Malaysia,” he added. Like Vietnam, Malaysia is also a good market for businesses in the electronics industry. Malaysia is also a “hot country” for firms in the technology, media, and telecom (TMT) sectors, according to Ng. Apart from the SEA countries, local enterprises are also interested in venturing into the Mainland (50%), the rest of North Asia, particularly South Korea and Japan (26%), Taiwan (25%), Europe (23%), and the Americas, particularly the US and Canada (20%).

HONG KONG BUSINESS | Q4 2023

COVER STORY

Diversification to shape real estate investments in 2024 An expert said capital will cascade into “alternative” sectors next year.

Investors in the APAC real estate market are focusing more on diversifying their asset classes (Photos courtesy of Colliers Asia Pacific's Expert Talks)

APAC

ulti-family, senior living, and student housing are some sectors where investors are channelling their capital to diversify their assets and reposition themselves towards more lucrative avenues. “Investors are displaying greater adaptability in their investment strategies, navigating fluidly across both geographic and asset class considerations,” Christoper Pilgrim, managing director of Colliers Asia Pacific Global Capital Markets, said. He added that geographic diversification will serve as a core strategy for investors in the Asia Pacific. In addition to exploring alternative assets, real estate barons are also looking into thematic investments on a global scale. “Investors are increasingly drawn to narratives that align with overarching themes, fostering a strategic approach that extends beyond traditional market 28

HONG KONG BUSINESS | Q4 2023

boundaries,” Pilgrim said. Focus on ESG-compliant assets will also continue to 2024 as more investors see the value that these types of assets bring. ESG friendly assets are also likely to help drive rental growth in property sectors such as the industrial segment, said Catherine Chen, director for Asia Pacific Research at Cushman & Wakefield. Meanwhile, the flight-to-quality trend in the office and logistics sector will also push stakeholders to commit further towards addressing sustainability and climate change, said Christine Li, head of Research at Knight Frank Asia Pacific. Next year will also be a transformative time for the property market as it is expected to see higher transaction volumes on the back of the stabilisation of interest rates. Interest rate hikes have been one of the biggest challenges faced by investors and developers, with

Interest rates will peak as the Fed finally pauses on its extended rate hike cycle

Christopher Pilgrim

Catherine Chen

Hong Kong, Australia, and South Korea being amongst the most adversely affected, said Chen. “2023 has been one of the most volatile in recent history in terms of global interest rate rises and inflation, challenging for both the debt and equity investors across real estate asset classes,” Pilgrim said. “The expected stabilisation of interest rates will rejuvenate confidence within the debt markets, catalysing an upswing in lending and borrowing activities,” he added. Li echoed this sentiment, adding that 2024 will mark an “upturn for real estate investment markets” in the APAC region. “Odds for a soft landing that the Fed has been trying to engineer for its economy are getting better. Interest rates will peak as the Fed finally pauses on its extended rate hike cycle, which should allow bid-ask spreads to narrow and investment activity to rebound,” Li said. “Asia Pacific

COVER STORY will remain the main engine of growth for the global economy, and as China’s recovery gets on firmer ground, these conditions will continue to support the region’s real estate sectors,” she added. Office takes over In terms of investment, offices rose as the most transacted asset class in the APAC region. Based on data from Cushman and Wakefield, the office sector accounted for 38% of transactions in the first semester of the year (1H23). Office demand in APAC also held up better than in the United States and Europe, given the stronger return-to-office trend in the region, told Li. “With tech occupiers continuing to rationalise employee headcount, financial and professional services firms as well as flexible space operators have made up the slack in leasing activity,” she said. Data from Knight Frank showed that office rents in the APAC region have continued to decline in 2023. As of 1H23, rents have declined by 1.8%. Martin Wong, director and head of Research & Consultancy for Greater China at Knight Frank, confirmed the slow leasing activity in the office market, saying the market’s weak performance is due to the large supply available and the slow movement of investors amidst the high interest environment. Li had a similar sentiment, saying, “The rise in funding cost and concerns over slowing economic growth has generally sparked more caution for developers as buyers are turning more selective in tandem.” “Office property landlords have reacted to the structural challenges brought on by hybrid working styles and a flight-to-quality trend as tenants focus on what it occupies rather than just how much,” she added. Increasing allocation for industrial Behind office, the industrial sector was the second largest sector in APAC in terms of investment. Pilgrim said there has been a sustained uptick in capital allocation towards logistics assets in APAC. According to Chen, the share of

industrial investment increased from a 10-year average of 17% (2013 to 2022), to 22% in H1 2023. “As a major logistics hub, Asia Pacific remains underserved by modern and high-quality logistics facilities, on the back of growing demand from a rising middle class,” Chen said. Other driving forces of the industrial market include e-commerce and third-party logistics (3PL) players, as well as manufacturers, said Li. “Whilst e-commerce demand is normalising, optimisation of the sector’s logistics footprint has driven demand for modern facilities. Preference for institutional-grade facilities in core areas and last mile locations continued to fuel leasing activity in the region, whilst China+1 strategies also saw ongoing expansions by major manufacturers in Southeast Asia,” Li explained. The same was observed by Chen, adding that the China+1 strategy has driven interest for manufacturing and logistics assets in Southeast Asia. Retail remains relevant Compared to the industrial segment, the retail sector performed best in Singapore in terms of investment. Chen said retail investment accounted for over half of the total transaction volume in Singapore in H1 2023. “This was primarily led by

Christine Li

Martin Wong

The rise in funding cost and concerns over slowing economic growth has generally sparked more caution

a few large deals bought by Frasers and Link REIT,” added Chen. Region-wide, Pilgrim said the retail sector in APAC “displayed remarkable resilience and strength compared to other regions.” “It stands out with its consistent performance, boasting a streak of 12 months with stabilised yields,” Pilgrim said. Respite for residential Like retail, the residential sector, particularly in Hong Kong and Australia, is also receiving interest from investors. According to Pilgrim, there has been an increase in investment in the apartment subsector in Hong Kong and Australia. In 1H23, apartments accounted for 16% and 14% of total investment of the respective markets. Residential sales have also been performing quite well in Hong Kong as developers are becoming more aggressive to clear up their investors, said Knight Frank’s Wong. Many developers in the region are likewise trying to free up their investors left in the past two to three years, added Wong. On the buyer side, Li said they are taking advantage of the rate hikes being paused at the moment. “Buyers are utilising this window of opportunity to lock down on their dream homes,” she said.

There has been an increase in investment in the apartment subsector in Hong Kong [left] and Australia [right] (Photo by August_0802 and designium from Shutterstock)

HONG KONG BUSINESS | Q4 2023

COVER STORY

High interest rates stall foreign property deals in Hong Kong

About 5% to 6% of the market purchasing power has gone due to rate adjustments. HONG KONG

ith mortgage rates reaching as high as 6%, Hong Kong’s nonresidential investment market failed to recover even with the border reopening. Predictions of a rebound were thwarted as high interest rates deterred foreign investors from the city's real estate sector, said Rosanna Tang, executive director and head of Research, Cushman and Wakefield. “The rising bank mortgage rate for commercial properties, and hence the financing costs, coupled with limited options for high-yield assets in the market, have brought buyers and sellers to an impasse,” Tang told Hong Kong Business. Martin Wong, director and head of Research & Consultancy for Greater China at Knight Frank, shared a similar sentiment, adding that the average monthly instalment for smallto medium-sized unit borrowing of around HK$5m (US$637,500)

has increased by almost HK$4,000 (US$410) per month already. “If the interest rate continues to go up, it will really erode the market purchasing power further,” said Wong. “Almost about 5% to 6% of the market purchasing power has gone because of the interest rate hike. If we are seeing that continue, it will erode even further the purchasing power market, and probably drive down the sales again.” Apart from commercial properties, Wong said residential properties in the city are also not a good option for foreign investors under the current market, citing the city’s additional stamp duty. “Foreigners still have to pay an additional stamp duty of 30% of the transaction value. I don’t think foreigners would like to touch on the residential properties because of that stamp duty,” Wong said. Whilst current market conditions do not favour foreigners, Tang said

The rising bank mortgage rate for commercial properties have brought buyers and sellers to an impasse (Photo by leungchopan from Shutterstock)

HONG KONG BUSINESS | Q4 2023

Now is an “opportune time” for local investors and end-users

Rosanna Tang

now is an “opportune time” for local investors and end-users, adding that property prices have corrected notably since the pandemic. Wong agrees with this insight, believing that local cash rich investors should still invest on residential properties in the city because the market and prices are “relatively weak.” Based on data, local investors have indeed been taking advantage of the current market conditions in Hong Kong, becoming the most active buyers in H1 2023. Tang said local capital accounted for almost half of the total transactions in the city. “We are now also observing greater activity from mainland investors and state-owned enterprises when compared with the prior three years of the pandemic,” Tang explained. Institutional investors, on the other hand, remained cautious amidst the high interest rate environment. Data from Knight Frank showed

COVER STORY

Martin Wong

Frederick Lai Transactions in the residential sector have been declining (Photo by kylauf from Shutterstock)

that the total large-sized [HK$100m (US$12.79m)] non-residential transaction volume dropped 20.2% QoQ and 61.8% YoY in Q2 to HK$8.3b (US$1.06b). The 2Q record brought the H1 2023 volume to HK$18.7b (US$2.38b). Top-performing sectors In terms of sectors, Tang said private land sites, office assets, and retail properties performed the best in H1 2023, accounting for 30%, 21%, and 21% of the transaction volume for the period, respectively. Strata-title offices, high-street shops, and retail podiums were particularly popular amongst investors. The city’s industrial sector has likewise been relatively resilient over the last two years, receiving active transactions. “Investors are still keen to explore opportunities in this sector. However, the more aggressive asking prices from landlords have led to a slowdown in industrial transactions this year,” Tang said. The hospitality sector has also seen some increase in deals, particularly hotels — thanks to the recovery in tourist arrivals and accommodation needs since the border reopening. Transactions in the residential sector, on the other hand, have been declining. “The subsequent interest rate hikes in May, coupled with global stock market volatility, have dampened potential buyers’

appetites towards the later-half of Q2 and recent two months (June and July),” Tang said. Will stamp duty help? To help the residential sector, the government eased residential mortgage rules in July. Experts, however, said the easing will only help selected homebuyers. “I perceive this policy as being more favourable towards supporting or facilitating first-home buyers or individuals seeking to upgrade their flats, rather than significantly boosting the residential transactions and prices in the market,” Tang said. Frederick Lai, senior director of Capital Markets at CBRE Hong Kong, had the same sentiment, saying that easing of the mortgage restrictions will help homeowners upgrade to larger flats. “Ultimately, because of the high interest rates and the high cost of financing, it’s making deals very hard to transact and pencil at the moment. So until that changes, I don’t think the other policy will really have too much of an effect on the investment market in Hong Kong,” Lai said. Tang said that whilst the market believes interest rate hikes will peak in the second half of the year, many also believe that a high interest rate environment will still persist for quite some time. For investors, whether local or foreign, who remain keen on investing on commercial properties

Bevis Lo

High interest rates and high cost of financing are making deals very hard to transact and pencil at the moment

in Hong Kong, Bevis Lo, director of Advisory & Transaction Services – Office Services at CBRE Hong Kong, suggested some locations to consider. Since Hong Kong is traditionally an Asia-Pacific financial hub, Lo said business in the banking, finance, and private equity sphere should build their presence in Central and Admiralty. For firms that belong to the FastMoving Consumer Goods (FMCG) segment, telecommunication, pharmaceutical businesses, or trading businesses, going further east of Hong Kong Island would be good. Particular locations in the east of Hong Kong which Lo recommends include Wanchai, Causeway Bay, Hong Kong East. Tsim Sha Tsui or Kowloon East are also good locations, Lo noted. However, he underscored that firms should buy properties based on their needs. “Hong Kong buildings, typically on average, they’re around 30 years old. So it really depends on respective businesses having the need for flight-to-quality,” Lo said. “As you go further east, down towards Hong Kong east and Kowloon East, that’s where building median ages go down drastically to 10 to sort of 15 years as well. That's where I see the emerging markets would be. We're seeing more and more occupiers wanting to satisfy flight-to-quality moving into those sub-markets,” he added. Very competitive edge Whilst high interest rates have stalled many property transactions in Hong Kong, Lo believes that the city remains to have a “very competitive edge over other Asian cities.” “Geographically, we’re in a very, very good position. We’re connected to China. Also, flight time and travel time to other Asia Pacific cities is very, very close,” Lo stressed. “I feel like, for Hong Kong, as long as landlords are aligned with occupier's needs, whether it’s satisfying ESG criteria, or facilitating them in terms of initial investments, or even the likes of building enhancements… I believe Hong Kong still has its competitive edge over other Asian cities,” he concluded. HONG KONG BUSINESS | Q4 2023

REAL ESTATE 20 UNDER 40

Hong Kong's top real estate agents under 40

n search of the best agents in the country under the age of 40, Hong Kong Business reached out to over 50 real estate firms in the city. After a rigorous review of nominations submitted by the firms, five women and 15 men made it to the final cut. Agents in this year’s list come from Savills, JLL, CBRE, Cushman & Wakefield, Colliers, and OKAY.com. Leading the pack is Savills, boasting six representatives. The youngest in this year’s list is also from Savills. Realtors in the office market took the lead in the list, taking thirteen spots. This year’s awardees are million and billion sellers in their respective firms and have handled big clients such as HSBC, Huatai Financial, Peak Re, FedEx, Viva Properties, AEON Credit, NEO, and Love, Bonito, to name a few. Here are this year’s awardees arranged from youngest to oldest. 3

Philip Lam, the Savills' senior manager on the Retail team, has secured huge deals, including Love, Bonito's 14,000 sq. ft flagship at Windsor House, through his international network and collaboration with other offices. He also excels in guiding clients through Hong Kong's retail market challenges. During COVID-19, his focus on local consumption led to the success in suburban deals, helping F&B businesses thrive. His versatility extends to anchor tenant deals, advising on positioning and strategy for retail developments. Philip's resourcefulness and expertise have contributed to his success.

Karis Wong 29, JLL Hong Kong

Karis Wong, a senior manager at JLL Office Leasing Advisory Team, has excelled for eight years with over 2 million sq ft in 240 transactions. Her expertise covers project leasing, tenant representation, and advisory services. Notably, she assists key occupiers, including MNC financial institutions leasing in ICC, Two Harbour Square, and Two Taikoo Place, totalling 750,000 sq ft. Additionally, she serves as marketing agent for over 1.9 million sq ft in newly completed Grade A office developments. Karis’s commitment to providing professional advice has made her a valuable asset to the firm and its clients. 32

HONG KONG BUSINESS | Q4 2023

Philip Lam 28, Savills Hong Kong

Zac Wong 30, CBRE

Zac Wong is a director in CBRE Capital Markets. He became the youngest director at age 27. Zac earned the Excellence in Office Services award in 2021 and was a Top 20 Performer in Hong Kong in 2021 and 2022. He fearlessly switched from Office Services to Capital Markets during the COVID-19 downturn, achieving a personal record of 57 transactions and 32 new clients in a year. As a director, he provides property sales and acquisition services for developers, private equities, and local investors, utilising his surveying knowledge for strategic investment plans. He also enjoys mentoring new joiners and Graduate Trainees at CBRE.

Fionne To 29, JLL Hong Kong

Fionne To is the youngest director at JLL Office Leasing Advisory with eight years of experience. She has advised on over 2 million sq ft of transactions, generating revenue of over HK$15m (US$1.9m) since 2020. Her expertise includes landlord representations, restructures, and rent reviews. Notable deals include a 60,000-sq ft surrender transaction, 100,000-sq ft rent review, 300,000-sq ft bank consultancy, and a 1 millionsq ft new development advisory project. She actively mentors and is part of JLL’s Women and Allies Network, promoting gender equality and supporting young female leaders. 5

Bevis Lo 30, CBRE

As one of CBRE Hong Kong's Top 20 Performers in 2021, Bevis Lo was promoted to Director at 28, mentoring new graduates and junior brokers. Notable transactions include HSBC's Hong Kong Portfolio and Huatai Financial's lease acquisition. He collaborates with CBRE Asia Pacific to provide comprehensive advisory services to maintain CBRE's competitiveness. As a director at CBRE's Office Leasing Team, he specialises in strategic advisory for occupiers in Hong Kong. Joining as a Graduate Trainee, he later excelled in Tenant Representation, handling over 30 transactions annually.

REAL ESTATE 20 UNDER 40 6

Ryan Cho (CHO Chun Kit) 30, Cushman & Wakefield

Ryan Cho, the youngest associate director at Cushman & Wakefield (C&W), specialises in strategic advice for MNCs and PRC occupiers. Since joining as a Graduate Trainee in 2016, he has achieved HK$15m (US$1.9m) in sales revenue with an annual growth rate of over 35%. Notable deals include office expansions for a leading consultancy firm at The Millennity (40,000 sq ft) and 12 Taikoo Wan Road (25,000 sq ft). He also represented a regulatory body acquiring 35,000 sq ft at Two Taikoo Place. His mentoring of graduate trainees and junior brokers reflects his leadership qualities. His commitment and forward-thinking attitude for real estate set him apart as a true leader.

Eugene Yip 32, Colliers

Eugene Yip is a rising star at Colliers, specialising in Landlord Representation. Since joining in 2018, he has excelled in managing key projects, including the Hong Kong Club building, where he maintained low vacancy rates and renewed whole floors during a challenging market. He has won and led nine sole agency projects, including Standard Chartered Bank Building and Dah Sing Finance Centre. His integrated project planning and collaboration with the marketing team have differentiated buildings in the market. His success earned him the promotion to associate director for Office Services. Eugene’s expertise makes him a valuable asset at Colliers.

Conrad Fong 30, Savills Hong Kong

Conrad Fong, Savills’ senior manager, is a leading figure in commercial property lettings. With a focus on clients’ interests, cost-effectiveness, and sustainability, he has achieved 130,000 sq ft of Class A commercial lettings in recent years. Despite pandemic challenges, his resourcefulness settled impressive lettings. He excels in coordinating innovative office solutions, like Peak Re’s move to West Kowloon Cultural District’s creative hub and a 7,000-sq ft unit with stunning views in CCB Tower. His adaptability extends to successful retail leasing for F&B groups, like NOC Coffee’s 6,000-sq ft space tailored to nomadic work culture.

Norman Wong 33, OKAY.com

Norman Wong brings close to a decade of experience in luxury real estate. He has earned a reputation amongst UNHW individuals, finance professionals, and investors as a trusted advisor and highly effective negotiator. With these attitudes upfront, he is considered as a valuable agent not only to his clients, but for the company as well. In 2022 alone, he closed over HK$200m (US$25.5m) in residential sales and was awarded as OKAY.com’s distinguished 2022 Agent of the Year. His track record and his continuous efforts paved the way for this recognition. As a luminary this year, he perseveres to give remarkable service to his customers and the company.

Zeith Lo 31, JLL Hong Kong

Zeith Lo achieved director status within six years, showcasing his exceptional capabilities. He has established his reputation as one of the few in the industry with extensive expertise in both the Hong Kong Island market and Kowloon market. He has advised multiple Fortune 500 companies including local, PRC, and multinational occupiers, and negotiated with leading commercial landlords across both markets. His ability to learn and apply the knowledge across markets and sectors sets him apart. Trusted by tenants and landlords alike, Zeith and the JLL Team secured a sole leasing agency project for Viva Place. His skills drive him to reach new heights in the industry.

Frederick Lai 34, CBRE

Frederick Lai, senior director in CBRE Capital Markets, Hong Kong, joined as a Graduate Trainee in 2012. He became one of the youngest senior directors in 2022. Over eight years, he sold worth HK$12b (US$1.5b) of real estate across office, retail, industrial, and hotel assets. Frederick has a proven track record for diverse clients, including private equity funds, family offices, investors, and developers. Notable transactions include the record-setting HK$5.82-b (US$742-m) sale of flagship automobile 4S centres in 2021. He also won prestigious awards, including the Circle of Excellence for Capital Markets 2020-2021, R.I.S.E Award in 2021, and Young Achiever Award in 2019. HONG KONG BUSINESS | Q4 2023

REAL ESTATE 20 UNDER 40 12

Alex Siu 34, Colliers

Alex Siu, a senior associate director at Colliers, has completed 25 transactions this year, surpassing his numbers in the past years. His career highlights include FedEx’s 40,000-sq ft relocation and AEON Credit’s 38,000-sq ft renewal, and his recent appointment by one of the largest financialservices companies in Japan for office projects totalling 150,000 sq ft. He also excels at landlord representation with clients like NEO, Manulife Financial Centre, and Goldin Financial Global Centre. His project development background supports his strategic solutions for real estate portfolios, culminating in 112 deals worth HK$1.1b (US$140.2m) and involving 1 million sq ft.

Thomas See 35, Savills Hong Kong

Thomas See is a valued member of Savills for eight years, specialising in super luxury residential single lot and en-bloc/site sales in prestigious areas. He has concluded over HK$12-b (US$1.5-b) worth of transactions, including the sale of No. 39 Shouson Hill Road for HK$5.93b (US$756m), which was the most expensive residential single lot transaction in HK's private market. In 2017, he represented Wu’s family of Wing Lung Bank to generate over HK$4b (US$509.96m) in sales revenue for Altamira in just one year. His expertise and track record in the luxury residential market have earned him a reputation as a respected professional. His skills make him a valuable asset to Savills. 34

HONG KONG BUSINESS | Q4 2023

Nathan Chan 35, Colliers

Nathan Chan was recently promoted to associate director at Colliers. He guided SMEs and MNCs during the pandemic in cost-saving exercises such as relocations and downsizing. In his eight years at Colliers, He transacted approximately 1.5 million-sq ft. In 2022, he handled a construction company’s 70,000-sq ft lease renewal, a beauty company’s 20,000-sq ft renewal, and 10,000-sq ft (for a total of 30,000 sq ft) expansion, and assisted a multinational technology company’s upgrade from an industrial building to Grade A oﬃces. He specialises in Kowloon and South Island markets, assisting MNCs and public institutions to formulate oﬃce plans.

Ella Lai 36, Colliers

Ella Lai, one of Colliers’ top brokers, is a senior director in the Oﬃce Services department, specialising in the Kowloon market. She provides tenant advisory services to multinational corporations and publicly listed companies, formulating and implementing their real estate strategies, reviewing rent, restructuring, and negotiating leases. Her client portfolio covers a broad spectrum of sectors, like banking and ﬁnance, insurance, retail, garment and sourcing, and engineering. She has been at Colliers for 13 years, and has transacted more than 5 million sq ft in more than 300 transactions with projects worth more than HK$1.5b (US$191m).

Yan Yan 35, Savills Hong Kong

Yan Yan’s impressive career at Savills is a testament to her passion for real estate and unwavering commitment to exceptional service. With over four years of experience, she specialises in overseas residential markets, particularly prime London properties. She advises high-net-worth individuals in Hong Kong and Mainland China on purchasing properties overseas. Yan’s track record includes 136-unit deals totaling HK$1.8b (US$229.5m) in sales volume. Her strong work ethic, attention to detail, and client relationships contribute to her reputation as a prominent figure in the industry. Yan’s success is driven by her dedication to providing topnotch service and client satisfaction.

Maggie Ji 39, CBRE

Maggie Ji, head of PRC Desk, Advisory & Transaction Services at CBRE Hong Kong, has 15 years of experience specialising in office leasing and investment for PRC clients in Hong Kong and overseas. With deep knowledge of both local and mainland China markets and an extensive PRC client network, she provides comprehensive office advisory and transaction services. Maggie’s exceptional communication, negotiation, and legal expertise ensure smooth transactions, bridging cultural differences. She delivers high-quality results, gaining clients’ trust. Prior to CBRE, she excelled as a top broker at another world’s leading office agency in Hong Kong, handling signature transactions in the Chinese PRC sector.

REAL ESTATE 20 UNDER 40 18

Ivan Wong 39, Colliers

Ivan Wong, a leading Tenant Representation expert at Colliers Hong Kong, has over 15 years of experience in brokerage, project leasing, and financial analysis. Specialising in the Kowloon market, particularly Tsim Sha Tsui and Kowloon East, he has completed landmark deals, leasing about 5 million sq ft of commercial office space across 450 projects valued at over HK$2b (US$254.98m). His success earned him the role of Head of Kowloon, Office Services. Ivan’s leadership has led to the promotion of three rising stars to associate director grade. He also excels in transactions on Hong Kong Island, recently securing a major luxury fashion brand’s lease of a 30,000-sq ft space on a high floor.

Mark Elliott 39, Savills Hong Kong

Mark Elliott is the accomplished head of International Residential at Savills Hong Kong. He joined in 2017 and quickly became a board member, a testament to his leadership and sales skills. With 17 years of solid experience across various global markets, Mark is an awardwinning sales professional. He has expertise in international markets like the UK, New York City, Los Angeles, and more. He enjoys working with diverse clients and investors worldwide, providing straightforward advice based on his strong sales experience. In 2022, he sold 10% of a London development and the Queen’s Penthouse at another prime London development in 2023.

Gavin She 39, Savills Hong Kong

Gavin She is an integral part of Savills Hong Kong, with 12 years of experience and a strong track record as a director in the international residential team. He specialises in super prime UK real estate for high-networth individuals, offering clients a wealth of knowledge and expertise. Gavin is highly knowledgeable about global property markets like the UK, US, Canada, Australia, and Singapore. His best year saw him brokering 122 deals with a total value exceeding HK$1b (US$127.49m), a record in the overseas property sector. Gavin’s professionalism, integrity, and commitment to customer service have earned him respect in the industry.

HONG KONG BUSINESS | Q4 2023

REAL ESTATE OUTLOOK locations for firms decentralising. Some are also moving towards the East Hong Kong Island, where there is “quite a lot of significant cost cutting,” explained Yip. Meanwhile, those who stay in the same discutie would have some “flight-to quality” by paying a very similar price range but for “better amenities, newer buildings, nicer lobbies, and better client facing.” Luxury property buyers, on the other hand, still prioritise prestigious addresses and sought-after locations despite global economic conditions. See said most buyers prefer Victoria Peak, Southside and Jardine Lookouts. “These areas normally consist of single lot houses as well as low-rise apartments,” he said.

Office vacancy in Hong Kong is over 15% already and this has created more options for the occupiers (Photo by Mei Yi from Shutterstock)

Occupiers, homebuyers gain leverage in HK property slump Tenants ask for up to 30% discount when renewing office leases.

ong Kong's slowing real estate market has led to a fascinating shift — the once-dominant bargaining power of landlords and sellers has passed into the hands of occupiers and homebuyers, who are now assertively seeking substantial discounts in negotiations. With office vacancy rates surpassing 15%, occupiers are leveraging their newfound strength, expecting discounts of 20% to 30% during lease negotiations, according to Alex Siu, senior associate director for Office Services at Colliers, told Hong Kong Business. “As the market is not performing that much, a lot of them are looking to get a little bit of a tiny discount on where they are,” Eugene Yip, associate director for Office Services at Colliers. In the luxury residential market, Thomas See, senior associate director at Savills Hong Kong had a similar observation. “Buyers are more cautious [on] buying properties

HONG KONG BUSINESS | Q4 2023

Alex Siu

Eugene Yip

Thomas See

as they expect a substantial discount from the current market,” said See, one of this year’s Hong Kong’s Real Estate Agents Under 40. “Most buyers for luxury property are currently locals as they are relatively more cash rich, and the current market has more room for negotiation,” See added. The Savills agent said mortgagee stocks have also been generally discounted from the market price at approximately 10%–30% discount. Location vs cost The slowdown of the market, paired with global macroeconomic conditions, has also affected the way tenants are choosing the location of their offices. Yip, also one of Hong Kong’s Real Estate Agents Under 40 for this year, said many businesses have been focusing on “decentralisation” or leaving the expensive central core business district. Sharma, Wanchai, Causeway Bay have been “hot”

Higher budgets Occupiers also select locations based on their respective budgets. Firms in the banking and finance sector, for example, typically have higher budgets given their need to stay in prime locations. Siu said firms in such sectors often choose Central, Admiralty, Tsim Sha Tsui, and Wan Chai where they often pay somewhere around HK$50 (US$6.40) per square foot (psf) or even over HK$150 (US$19.19) psf for office space. Banking and finance firms, however, would choose decentralised areas for their back office operations such as Kowloon East, East Hong Kong Island where the rental range can be more affordable, from HK$20 (US$2.56) psf to HK$50 (US$6.40) psf. Sourcing or logistics companies, meanwhile, would tend to lease buildings in Kowloon East, Lai Chi Kok, Kwai Ching, and Tsuen Wan, where leases range from low to mid at HK$20 (US$2.56) psf. In the luxury market, See said buyers mostly focus on properties worth HK$100m (US$12.79m) and above Types of buyers, tenants Based on See’s observations, most buyers of luxury properties are now locals as “high-net-worth-individuals from the Mainland are no longer buying properties like they used to.”. To read the full story, go to https:// hongkongbusiness.hk/

HONG KONG BUSINESS | Q4 2023

INDUSTRY INSIGHT: RESIDENTIAL

Dash Living on Prat (Photo from Dash Living)

More hotels pivot to co-living for better margins and stable cash flows From 2020 to Q1 2023, around six to seven hotels have been acquired for conversion.

he growing trend of hoteliers offering extended stays has spurred investors to acquire underperforming hotels to repurpose them into co-living spaces that have gained immense popularity in Hong Kong, especially amongst the local young professional demographic. What makes hotel assets attractive to investors and co-living operators alike is their relatively “quick turnaround” and “minimal capital expenditure requirement versus other asset types.” “Pricing for hotels was generally cheaper than the equivalent pricing for a comparable residential building for the same purpose,” Shaman Chellaram, Colliers’ senior director of Valuation & Advisory Services for Asia, told Hong Kong Business. “Hotels themselves present an opportunity to potentially drive a higher return on investment; but bear in mind that each opportunity must be looked at on a case-by-case basis,” Chellaram explained. 38

HONG KONG BUSINESS | Q4 2023

He added investors are also keen to convert hotels into co-living spaces since the latter’s model offers low operational expenses, requires fewer staff, and “when operated well, can provide strong margins and a more stable cash flow.” “Apart from the ease of conversion and some pricing dislocation, hotels give co-living investors the additional flexibility of providing a combination of short stay and longer stay options for their guests, enabling the owners to operate a hybrid hotel slash co-living model to capture changes in demand and any potential uplift in their daily rate,” the Colliers expert said. From hotels to co-living spaces Converting hotels into co-living spaces may take as short as three weeks to as long as nine months, according to Aaron Lee, CEO of Dash Living. He said the length of time for conversion depends on how heavy the construction will be.

Pricing for hotels was generally cheaper than the equivalent pricing for a comparable residential building

Shaman Chellaram

When converting hotels, Lee said his team looks at the building plans first. “We ensure compliance. We look at what spaces we can change, what spaces you can actually change the usage of or if change is even needed,” Lee told Hong Kong Business. He said this process may take anywhere from a couple of weeks to a month. After the compliance check, Dash Living proceeds with the design process which includes picking areas in the building where they can extract the most value. Before the co-living operator transformed Dash Living on Prat, the building’s basement used to be a restaurant. “This asset was acquired during the pandemic, so obviously, retail was heavily hit,” recalled Lee. “We realised the basement was underutilised and the business in the basement wasn’t so good." That basement is now an almost 4,000 plus square-foot communal area. “That area contains all of the kitchen, laundry space, [and] meeting

INDUSTRY INSIGHT: RESIDENTIAL space. There’s also a multi-purpose room… for yoga and meditation events. There’s also pilates and yoga class for guests that happens there once in a while,” Lee said. After the design process is the construction. As one of the project managers, Dash Living monitors the entire construction process. “We check the noise, smell, all these factors, when constructing the space,” Lee said. But even during the construction phase, Dash Living already offers the units for sale to facilitate a quicker move-in for guests once all the work is completed. Co-living’s rising popularity In Hong Kong, about six to seven hotels have been acquired for conversion into co-living spaces. This figure accounts for around 2,038 keys or rooms. Some hotels which have adapted the co-living model include Rosedale Hotel, Travelodge Hollywood, and Butterfly on Prat Hotel. Dash Living, for its part, has helped 22 hotels in Hong Kong shift to a co-living model. Of these 22, Dash Living helped two with the actual conversion and construction. Chellaram said co-living owes its popularity to the convenience and flexibility it offers, which tenants, particularly young professionals look for in their accommodation. “People, especially at the earliest stage of their careers, want the convenience and flexibility of not being bound by long-term contracts and without the burden of having to buy their furniture and they want to live with like-minded people,” the Colliers expert said. “Many co-living operators provide social activities, events, and a sense of belonging to a wider network or community or ecosystem — and that’s something that tenants are very attracted to. There are also additional perks that come with opting for co-living. This ecosystem is especially attractive to young professionals entering the market or new people coming to the city from the mainland or overseas,” Chellaram explained. In Dash Living, one of the perks that tenants get is access to all their facilities — which is not confined in the building they are occupying.

“Whilst people do pay a premium per square foot basis [in our rooms], they get access to all our facilities globally. We have 40 plus perks which tenants can use globally. These cover co-working and storage spaces, F&B, spa and wellness owned by our partners which they can use,” Lee shared. A testament to co-living’s popularity in Hong Kong is its high occupancy rate. According to Chellaram, many operators in the city get 80%–90% occupancy and some are even running close to 100% with waiting lists. “It’s been well documented in Hong Kong that the city does have a housing supply and affordability problem with property prices too high for most people to get on the ladder to own their own house. Now, with interest rates even higher, that makes it harder, so the demand for rental property is even higher, especially given the recent increase in demand from the new talent attraction schemes. Rentals in the private sector are [also] often costly,” the Colliers expert said. “Co-living really kind of sits in the space to provide tenants with a hassle-free, plug and play, flexible, convenient, often well-designed, well-furnished, affordable living solution in good urban locations with a community feel and professional management,” Chellaram added. Lee echoed this, adding that coliving supplements the problems that traditional accommodation is having.

Co-living fits for some people, but it’s not for everyone

Goodbye hotels? Whilst Chellaram believes co-living’s popularity will only continue to grow

moving forward, he does not think that this type of accommodation will overtake hotels. The Colliers expert underscored that the two types of accommodation cater to different markets and endusers. “Co-living fits for some people, but it’s not for everyone,” he added. Chellaram also underscored that hotels have been seeing improvement in terms of occupancy. By end of June, occupancy of hotels in the city was around 82% with daily rates hitting HK$1,323 (US$169.22). Potential sub-sector The Colliers expert added that he sees co-living as a potential sub-sector of both hotels and the residential sector. “I think [co-living is] a threat [to hotels] in the sense that where there are underperforming assets, then certain co-living operators may come in to acquire and reposition those assets. It does provide some competition in the mid-scale sector for mid-to-longer stay options.” Chellaram said. “But in terms of an overall threat, I don’t see it. I think it’s complementary to the sector. It provides end users with a different accommodation option. In my view, all competition is good. It spurs creativity and new ideas in the sector and ultimately gives the customers more choice,” he added. Lee echoed a similar sentiment, saying that co-living will not overtake traditional accommodation. “Coliving will not be able to replace traditional accommodation, but for the big social issues around lifestyle, it definitely is a good solution for it,” he concluded.

Kitchen space on Dash Living (left), Aaron Lee, CEO of Dash Living (right)

HONG KONG BUSINESS | Q4 2023

INDUSTRY INSIGHT: EDUCATION

Topping their preference list are Morgan (25.4%); HSBC (21.7%); and Morgan Stanley (14.31%) (Photos by Alois Oscar, lentamart, and TK Kurikawa from Shutterstock)

HK scholars seek top finance jobs for work-life balance Educators at business schools confirm that students’ career priorities have shifted.

usiness students in Hong Kong universities have set their priorities straight when it comes to a balanced work environment. Hence, established finance companies in Hong Kong have been top-of-mind due to the attractive benefits the firms uphold. A recent study, titled Universum Talent Research 2023, showed that Hong Kong business students prefer working for companies in the banking industry. Topping their preference list are J.P. Morgan, voted by 25.4% of the respondents; HSBC with 21.7%; and Morgan Stanley, 14.31%. Then comes Google at a close 13.7%, HKSAR Government at 13.5%, and then Apple, 12.2%. Hong Kong University of Science and Technology (HKUST) – Business School said in an exclusive correspondence with Hong Kong Business that students are provided with guidance and 40

HONG KONG BUSINESS | Q4 2023

High future earnings” has fallen in the list of graduates’ priorities

Wan Wongsunwai

support in accordance with their chosen career path. “To expand students’ exposure to the career market and different industries, we offer career-related initiatives that include industry talks, recruitment talks, dialogue with executive series, alumni sharing series, company visits, and career development workshops,” HKUST said. Likewise, in a study written by PwC, titled “Asia Pacific Workforce Hopes and Fears Survey 2023,” trends were identified that form the preferential taste of nowemployees. The results of the survey could be perceived as the preface to how aspiring business employees see the world. One of the salient points was the readiness of firms and how they can weather economic crises down to global pandemics. It stated that 39% of the respondents do not see their current place of employment surviving over 10 years.

“Reinvention is key to business viability,” the PwC study indicated. In a separate interview, Associate Dean of MBA Programmes,Wan Wongsunwai of the Chinese University of Hong Kong (CUHK) said that students are mostly keen on joining well-established institutions such as J.P. Morgan and HSBC. “Both of these companies… have been around for a very long time. And partly a consequence of being that old, they are also very big. They are both very highly globalised entities,” Wongsunwai said. “I think it’s not surprising that we will see many graduates from business schools in Hong Kong, from business programmes, thinking of those types of firms as their preferred destination.” The Universum survey also showed that the students prefer workplaces with “professional training and development” and those that encourage work-life balance. “High future earnings” has fallen in the list of graduates’ priorities, dropping to the 4th position, two places lower than the previous year. The change shows that students now prioritise factors that impact their well-being more than financial earnings. Dynamics of career choices The preferences of business graduates in Hong Kong reflect a blend of traditional values, economic conditions, and personal aspirations. These top firms’ long-standing presence instil confidence in job security and prospects for career growth. In addition, their reputable standing in the financial sector, coupled with the diverse career paths they offer, positions them as attractive destinations for young professionals. Meanwhile, the Universum survey also showed a decline in students’ expected annual salary upon graduation, decreasing from HK$303,000 (US$38,755.91) in 2022 to HK$292,900 (US$37,464.05), representing a 3% drop. This reversal contrasts with the trend observed in the 2022 survey, which showed a 19% increase in expected annual salary compared to 2021. This suggests that students are recognising the transition from the “great resignation” period to a more uncertain economic environment,

INDUSTRY INSIGHT: EDUCATION

CUHK equips its business graduates with the tools and support needed to make informed career decisions (Photo from the official website of The Chinese University of Hong Kong)

characterised by an increased likelihood of high-profile layoffs. Consequently, they are adopting a more cautious approach when setting their salary expectations. Students studying business or commerce also lowered their salary expectations (-6%), only expecting a pay of HK$279,700 (US$35,775.67) per annum. However, the evolving landscape has also witnessed a shift in students' career priorities, particularly in the aftermath of the COVID-19 pandemic. “There is still more pessimism, considering the time of the survey,” Wongsunwai said. “At the time, people were still struggling from the two years of non-ending restrictions [due to the COVID-19 pandemic].” As the pandemic exposed vulnerabilities in the global economy and redefined work-life balance, students began reevaluating their career aspirations. The decline in expected annual salaries upon graduation influenced a reorientation towards broader factors that contribute to personal fulfilment and job satisfaction. So, students were placing greater emphasis on work-life balance, job stability, and personal growth. Job satisfaction Job satisfaction levels have remained relatively stable over the past year though, PwC said. In its report, approximately 57% of employees expressed moderate to high job satisfaction, a trend similar to the global average and consistent with the previous year’s data. Still, significant

variations in job satisfaction levels exist across the region. Advanced economies such as Hong Kong, Japan, South Korea, and Taiwan reported lower satisfaction levels, ranging from 29% to 45%. Conversely, employees in Thailand, Indonesia, the Philippines, Mainland China, and India exhibit higher job satisfaction, ranging from 70% to 79%. New approach to holistic schooling In navigating the complex landscape of career choices, universities like CUHK stands for holistic education and career development. Even in its 60th year of academic experience, it has grown to produce visionaries. “In the context of business in Hong Kong, you look around at the senior executives in businesses around [Hong Kong]. Whether they happen to be local businesses or local officers

Students were placing greater emphasis on work-life balance, job stability, and personal growth

of multinationals, the chances are very high that these very senior executives are graduates of our programmes,” Wongsunwai expressed. By emphasising whole-person development, providing specialised concentrations, fostering an extensive alumni network, and offering mentorship programs, CUHK equips its business graduates with the tools and support needed to make informed career decisions. “Whether or not they have prior business exposure is not really relevant to what we are discussing here. It could be relevant in terms of them thinking about their future career direction, but as far as their primary reason for coming to a university like ours, they have basic expectations about things they will learn with us. Of course, our programmes are structured to deliver this… there can be quite a lot of variations.” Wongsunwai said. For HKUST, their business school segment ties close partnerships with corporates, non-government organisations, and alumni to offer alternatives for students to boost their career and personal development. HKUST offers 39 combinations of single- or double-major Bachelor of Business Administration programmes. It offers a full range of business courses: economics, finance, global business, general business management, information systems, operations management, marketing, management, and professional accounting. Also, students may opt to enrol in non-business minors.

HKUST offers 39 combinations of single- or double-major Bachelor of Business Administration programmes (Photo from the official website of Hong Kong University of Science and Technology)

HONG KONG BUSINESS | Q4 2023

INDUSTRY INSIGHT: MEDIA

E&M veterans need not fear generative AI – expert

PWC says AI will even benefit senior practitioners in the E&M industry.

midst the ongoing debate surrounding the potential impact of generative AI on the entertainment and media (E&M) industry, an expert asserted that seasoned professionals need not be concerned as they possess something that technology lacks—experience. “Workers don’t have to be concerned over its deployment because we [humans] have the taste; we are the final decision maker,” PwC Mainland China and Hong Kong media leader, Cecilia Yau, told Hong Kong Business in an interview. However, experts agree that the use of generative AI may reduce a significant amount of junior or preliminary work in the industry. She said media companies must create more job opportunities that would be interesting for the younger generation or existing staff that may be affected by job cutting brought about by the use of generative AI. Companies must likewise provide training for their staff or employees on how to make good use of AI technology to maximise its benefit to the industry as a whole, said Yau. Whilst many see AI as a threat, Yau underscored that the technology is more of a friend than a foe. When used and leveraged properly, AI can

The technology allows E&M organisations to transform their business — so long as they manage the new risks to security, privacy, bias, ethics, and brands

Cecilia Yau

James Lee

AI can give the producer an idea of how the arrangement of the set would look like (Photo by gnepphoto from Shutterstock)

HONG KONG BUSINESS | Q4 2023

help media companies in shortening the period of production and postproduction, which naturally results in saving costs. “In TV or movie production, for example, AI can give the producer an idea of how the arrangement of the set would look like [faster than setting it up]... Producers or creators can also get a pool of choices without significant incremental costs,” Yau said. Another example of how AI has been helpful in the media industry, particularly for content distributors, is in the area of dubbing. “Dubbing, most of the time, is one of the challenging areas when companies want to distribute their content overseas. AI helps a lot in the dubbing process,” said Yau. “It can make lip movement more natural, it can adjust the movement of the actors based on the language being used.” She said AI can also help companies reach their target audiences and help recommend content closer to their preferences. “AI collects consumer behaviour and tastes, this can help industry players create content which fit or are tailor-made for a particular group of people,” she said, adding that the technology helps connect

the end user. However, the media expert advised that whilst AI could be very helpful in the industry, media companies must be aware of “four areas” when deploying the technology: transparency, accuracy, accountability, and fairness. These four considerations help ensure ethical and responsible use of generative AI. “The integrity and accuracy of data is very important with respect to copyright. When you use a generative AI, you have to ask yourself where that data came from. The user must know to prevent infringement of copyright,” Yau said. Ethical use of AI Overall, she believes that generative AI will improve efficiency and cost saving for media industry players whilst also unlocking creativity. Data from PwC’s Global Artificial Intelligence Study revealed that openness to tap into the power of generative AI “will likely only continue to grow with an estimated HK$122.77b (US$15.7t) of potential contribution to the global economy by 2030.” “I believe generative AI will be widely utilised within the E&M industry for applications such as gaming, film, television and music production, advertising market and marketing strategies, providing content creators with tools to optimise the creative process and leading to more efficient workflows as well as innovative content production,” said James Lee, PwC Hong Kong AI and Emerging Tech consulting leader. “The technology allows E&M organisations to transform their business — so long as they manage the new risks to security, privacy, bias, ethics and brands,” Lee added. In Hong Kong, the E&M industry is expected to see a 5.55% YoY growth in revenue in 2023, to reach HK$76.32b (US$9.76b). According to PwC, the growth of the E&M industry in Hong Kong “will be steady” in the years to come and is expected to grow at a compound annual rate of 3.47% between 2022 and 2027and with revenue likely reaching HK$86.14b (US$11b) in 2027.

INDUSRTY INSIGHT: HR

Hong Kong's anti-job hopping rule seen to burden employment agencies Proposed rule preventing domestic workers from breaking two-year contracts may cost job agencies more and make the city less attractive to migrant workers.

he anti-job hopping rule for foreign domestic helpers in Hong Kong was proposed to protect employers from “unfairness and inconvenience.” Whilst the rule will benefit employers, an expert believes it will be the opposite for employment agencies. Fair Employment Agency General Manager Jasmine Lam told Hong Kong Business that the proposed rule will create “unsustainable financial burden” for employment agencies. The expert explained that under the proposed rule, employment agencies will be mandated to discuss with employers a refund arrangement should the domestic worker they assigned to a household breaks his or her contract. “Should the rule be implemented, the cost burden will eventually be passed on to the agencies and the agencies will need to rethink their cost structure on how to sustain their business,” Lam explained. Increasing expenses Agnes Chan, director of Lincoln Consultancy Services Ltd., said employment agencies will also have to increase expenses because under the regulations, they may need to provide additional training to their staff. “[Employment agencies] may need to spend more time and resources to ensure that foreign domestic helpers comply with the regulations, which could also increase the costs,” Chan told Hong Kong Business. “Additionally, employment agencies may need to adjust their services to comply with the proposed regulation, such as providing additional training and support to foreign domestic helpers to ensure they understand the current policy clearly, as requested by the Labour Department,” she added. Whilst the anti-job hopping mandate was made to protect employers, the rule also have negative implications on them.

Given its ageing population, there is a need to maintain an attractive domestic worker market (Photo by hanohiki from Shutterstock)

The root problem is the charging of excessive and illegal placement fees to workers

Jasmine Lam

Agnes Chan

“The job hopping rule will lead to an unpredictable visa approval process, creating uncertainty in the domestic workers market. Employers will [then] have a smaller pool of experienced workers to choose from and as a result that will actually prevent employees from hiring a candidate of their choice,” Lam explained. “[Agencies] will [then] look into increasing the pricing for the employers to cover unforeseen costs and potential losses. Those agencies that have been charging workers for placement might even pass the additional costs on to the workers,” Lam added. Overall, Lam believes the rule does not solve the root problem of what is perceived as “job-hopping” and is only addressing the symptoms. “The root problem is the charging of excessive and illegal placement fees to workers, which leads to the wrong incentives for employment agencies.,” Lam stressed. Less attractive labour market Given its ageing population, there is a need for Hong Kong to maintain an attractive domestic worker market. Chan said the rule may ultimately

lead to a “decrease” in Hong Kong’s attractiveness to domestic helpers. “As other countries, such as South Korea, are offering more favourable conditions, higher wages, and separate accommodation to the workers, they may become more attracted to these destinations,” she said. “This might result in a decline in the number of foreign domestic helpers willing to work in Hong Kong, impacting the labour force in these regions,” she added. But Chan did note that the rule still has positive implications, especially for the employers. “It can provide them with more stability in their workforce, reducing the need to frequently hire and train new domestic helpers,” she noted. “It may also improve the quality of service provided by domestic helpers by encouraging them to stay on the job throughout the whole contract period and develop more skills and experience,” she added. Given the pros and the cons of the rule, Chan encouraged the government to carefully assess the proposed regulation. To read the full story, go to https:// hongkongbusiness.hk/ HONG KONG BUSINESS | Q4 2023

INDUSTRY INSIGHT: AVIATION

Manpower shortage casts shadow on local aviation industry’s recovery Players like Hong Kong Airlines have already reinstated staff to increase its capacity.

ey players and experts warn that a labour shortage could stall Hong Kong's aviation industry's expected recovery by the end of 2024. “The demand for travel is high. The challenge is on bringing back capacity. Supply chain issues and a labour shortage meant that airlines have not been able to restore capacity as quickly as they would like to,” International Air Transport Association’s (IATA) Regional Vice President for North Asia, Dr Xie Xingquan, told Hong Kong Business. Hong Kong Airlines (HKA), one of the city’s key aviation players, shared a similar sentiment saying: “We anticipate that the manpower shortage in the global aviation industry will continue to pose challenges, potentially hampering our recovery and our ability to operate additional flights.” Reinstating staff In an effort to increase capacity, Hong Kong Airlines said it has begun reinstating staff who were previously put on a Long Pay Leave to their positions. “This was done to support the resumption of our flights. By the first half of the year, we managed to fill all pilot vacancies,” an airline spokesperson told Hong Kong Business. “Now, we are in the process of hiring an additional 70 cabin crew members to meet our operational needs,” the spokesperson added. According to the spokesperson, the airline has already managed to achieve their requirement targets for the first half of the year. “Going forward, we plan to continue recruiting more talent to support our business…We [will] continue our recruitment efforts both locally and internationally,” the spokesperson added. The airline also made adjustments to its hiring process in a bid to attract and retain more talent. “Our goal is to provide an efficient, clear, and respectful hiring process.

HONG KONG BUSINESS | Q4 2023

We [will] continue our recruitment efforts both locally and internationally (Photo from Hong Kong Airlines)

Despite reopening late, Hong Kong will reach prepandemic level at around the same time as major Asian markets

Xie Xingquan

In doing so, we have streamlined our hiring process to respect applicants' time and efforts,” the spokesperson added. Another retention strategy that HKA has implemented is its employee engagement programme, which recognises and rewards the efforts of their staff. Meanwhile, HKA is also working with local schools and universities to seek fresh talents that can fuel the growth of the airline. Apart from individual strategies of key players such as HKA, Dr Xie said the Hong Kong government’s labour importation scheme will also help alleviate some of the labour issues in the industry. In June, the government announced that it will ease entry rules in the city to bring in 27,000 foreign workers. The government has also set a recruitment quota for the aviation industry of up to 6,300 foreign workers, adding the industry has a shortage of frontline airport staff. Apart from capacity building, HKA said other factors which present challenges for aviation players include “changes in business and leisure travel practices in the post-pandemic world, sustainability concerns,

demographic shifts, and political and economic influences.” “These factors consistently inform the adjustments we make to our ticket pricing, product marketing strategies, and our decisions about opening new routes. They even impact our overall business model,” the spokesperson noted. Optimistic outlook Whilst many factors pose concerns for the progress of the industry, Dr Xie said the overall outlook of Hong Kong’s aviation sector remains optimistic. Dr Xie added that Hong Kong, despite reopening much later than other Asian markets, will be able to reach “prepandemic level at around the same time as major Asian markets.” “This shows the fast pace of Hong Kong’s recovery…Hong Kong’s recovery is in line with recovery in the Asia Pacific region," stressed Dr Xie. In preparation for the expected recovery of the industry, HKA has implemented several strategies including securing strategic investment funds for its restructuring which came into effect in April. To read the full story, go to https:// hongkongbusiness.hk/

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OPINION

HANNAH JEONG

The two thorns that are hurting Hong Kong's land resumption plan

HANNAH JEONG Head Valuation & Advisory Services Colliers Hong Kong

s the government intensifies its efforts to acquire private land for the Northern Metropolis and Northeast New Development Areas (NDAs) – for public housing and other public purposes – two crucial points are causing hiccups. The first is whether the government has clearly defined “public purpose”, whilst the second is whether compensation offered to landowners is reasonable. This commentary discusses two crucial aspects: (i) whether the government has clearly defined “public purpose” and (ii) whether the compensation provided to the landowners is reasonable. The problem with “Public Purpose” Hong Kong’s government typically justifies land resumptions as necessary for “public purpose” as relevant laws require. If the “public purpose” is to “implement an NDA”, the government can resume and clear all private land intended for development, carry out site formation works, and provide infrastructure. It can then earmark the formed land for different purposes, including disposal by tender for private development. However, the definition of “public purpose” has become ambiguous, as the government’s resumption of private agricultural lands for NDAs now satisfies the definition regardless of the final land use. This raises questions about whether “NDAs” have become an all-encompassing term for land resumptions under “public purpose” and whether this is perceived as fair. When it comes to end use, the laws and regulations on “public purpose” are unclear. This lack of clarity has led to different interpretations of what constitutes a “public purpose” and has created confusion and uncertainty for landowners and the public. As a result, the government’s use of the concept has been criticised for being too broad and arbitrary, leading to concerns about protecting private property rights.

“professional valuation”, which lacks any benchmark or details, is not a fair price. The owner or interested parties can decide whether to accept or reject the government’s offer. If dissatisfied, they can submit a claim for statutory compensation to the Lands Department. However, this assessment has also become contentious of late, as owners still worry that the government assessment will not render a fair price. If an agreement cannot be reached, either side may refer the case to the Lands Tribunal for final determination. The land is assessed on its legal use the Lands Tribunal will only assess the land value based on existing legislation, which implies that agricultural land will only be valued on its legal use. Landowners argue that the compensation assessment is unfair since agricultural land has a relatively low value compared to land with residential potential. Landowners argue that the compensation assessment is unfair since agricultural land has a relatively low value compared to land with residential potential – hope value – and expect to be compensated at a higher value. However, when the government resumes private agricultural land, its surrounding area is usually undeveloped, which lowers its value compared to developed areas. The government will be the party to establish infrastructure and a transport network based on the gazetted development plan, and this can only be carried out if sufficient land has been resumed. Only when the surrounding area is developed will the land value increase. This is when the government can dispose of the land for private development, and the formed land’s value increases. From the landowner’s view, the government is getting their lots at a low price, ignoring the development potential unless it has been robustly established, and selling it for private development at a much higher price.

The process lacks transparency In addition, the decision-making process for land resumption and final use lacks transparency. The government’s decision to resume land for a “public purpose” is often made behind closed doors without proper consultation with the affected parties. This lack of transparency erodes public trust in the government’s ability to conduct land resumption fairly and equitably. When the land is resumed, the government will first offer compensation based on the administrative ex-gratia compensation arrangement. In May 2022, the Lands Department changed the ex-gratia rates from four tiers to two to speed up resumption. These rates will be reviewed periodically and consider the prevailing market conditions. The Lands Department recently reduced the ex-gratia compensation rates for resumed agricultural land by about 13% (from HK$1,457 (US$186.32) per square foot in October 2022 to HK$1,267 (US$162.02) per square foot in April 2023) because land prices have fallen recently. Ex-gratia compensation has been contentious in any regard, and disputes are frequent. The landowners worry that the government’s

Providing more compensation options To increase confidence in the entire resumption compensation system, we suggest the government provide more options for the compensation assessment of ex-gratia compensation rates. The government is the only entity in Hong Kong able to quickly acquire land needed for the NDAs and the Northern Metropolis without lengthy negotiations with individual landowners. It is also the only entity able to implement large-scale resumption for “public purposes.” By having a well-defined master plan in place, the government can effectively allocate resources and ensure that the development is carried out efficiently and effectively. Developing these areas will ease the housing shortage and make living in Hong Kong more affordable, it will boost economic growth by creating jobs and attracting investment, and ultimately promote integration with the Greater Bay Area. To ensure public projects are successfully implemented whilst landowners’ rights are protected, the government should have a well-defined master plan, provide more transparency and options for compensation assessment, and engage in proper consultation with affected parties.

HONG KONG BUSINESS | Q4 2023

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OPINION

OLIVIER GERGELE

A new reality bites as retail grapples with consumer recessionary mindset

EOs globally have been forced to adapt to a new reality of constant disruption and uncertainty. Just as economies saw growth surges when emerging from the COVID-19 pandemic, many were plunged back into a state of slower growth, driven by geopolitical tensions, inflation, and higher interest rates. In Asia-Pacific, there is consensus amongst CEOs that a downturn is near, if not already in effect. According to the EY CEO Outlook Pulse, 99% of CEOs are actively planning for a downturn scenario, with a majority (72%) preparing for a severe downturn in the region. Consumers are likewise reacting to the downturn by reining in their spending and making dramatic, short-term lifestyle changes to cope with ongoing disruption. So how can retailers balance the ever-changing consumer preferences and macro issues impacting their business to create long-term value for consumers and themselves? Getting inside the evolving consumer mindset Retail CEOs today must unravel the consumer mindset which has lurched from pre-, during, and now the post-COVID-19 reality. This reality, according to the latest EY Future Consumer Index, is that more consumers in Asia-Pacific are now highly price-sensitive, prioritising essential goods and services over luxury and non-essential items. But price alone will not determine purchase decisions as a vast majority of consumers (72%) will focus more on value for money as they are being charged more for goods across the board. On this point, retailers must also be mindful of passing on higher production costs and prices directly to consumers. Value-driven consumers will favour brands that make efforts to limit price rises where possible. In the K-shaped post-COVID-19 recovery that we are witnessing across most countries, we also see the emergence of a distinct and niche premium consumer base that is highly motivated to spend on discretionary luxury purchases and experiences. This is reflected in the latest EY Future Consumer Index, where we see the ‘Experience First’ consumer segment being the fastest-growing one, as health and financial concerns diminish. These consumers are hungry for unique products and experiences, and value personalization and brand stories that echo their outlook on life. For retailers and their CEOs, these mindset shifts are a key focal point for determining strategies and key decisions for the year ahead. The perception of value is now a key battleground as consumers reprioritise in line with broader macro trends. Value is not just what they buy, but also measured by their purchase experience, and how the goods or service supports the way they want to live. Sustainability, impact on health and wellbeing, plus ethics in the way goods and services are marketed and provided to the consumer, will all have a bearing today on brand perception and purchase decisions. Hyper-personalisation driving data and technology needs A more nuanced value perception means retailers need to understand the trends shaping consumer lifestyles today. Consumers today no longer view themselves as part of a demographic group but as

HONG KONG BUSINESS | Q4 2023

OLIVIER GERGELE Consumer Leader Asia-Pacific EY-Parthenon Consumer Products & Retail Leader EY Asean

individuals. Retailers must transition segmentation strategies to address the needs of every individual. This demands accurate and constant insight which has elevated the use of data and analytics to new heights. The EY CEO Outlook Pulse survey highlights the intensified need for data as more than a third (38%) plan to increase their investment in digital transformation initiatives centred around data and technology. Beyond the usual data-informed buyer insights, data insights are also critical to optimising supply chains and adjusting pricing strategies. Timely data insight allows retailers and manufacturers to fine-tune supply chain decisions, increase operational efficiency, and reduce inventory and overall costs. Data insights are also critical to the growing sustainability requirements that are being applied to supply chain management today. Retailers to double-down on customer experience This drive to optimise across the value chain extends to the way retailers engage consumers. Experiences are the focus with product just being one element of the overall customer offering. Not only do consumers want personalised and contextual offerings from the brands they buy from, but they also demand to be engaged in exactly the ways they prefer. The desire for custom experiences means the pursuit of dynamic omnichannel capabilities, along with digital ecosystems and emerging metaverse solutions, will gather pace as consumers merge new-found digital convenience with a continued need for human interaction. Continued innovation will be central to transforming retail brand experiences for consumers. Brands must explore ways to engage consumers across the whole buyer journey and beyond and, identifying points to support consumers in how they live and work is also relevant today. In response, retailers will need to evolve the products and services they offer, their business operations, and how they engage the consumer beyond the product and service. Businesses also need to identify, implement, and integrate technologies that are right for today and for the future. Strategies must simultaneously embrace the reality today and the possibilities tomorrow to ensure relevance, resilience, and competitive edge in this current era of volatility and beyond.

Strategies must simultaneously embrace the reality today and the possibilities tomorrow to ensure relevance, resilience, and competitive edge

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