Stock Connect impact on Hong Kong's Grade-A office market 'colossal'

It helps China connect with the globe, too.

The Stock Connect signifies innovation in the financial institutional frameworks of Hong Kong and China, and a gateway for China to seamlessly connect with the world.

According to a release from CBRE, it also marks the creation of an offshore capital market for China that could lead to trading in all of China’s capital markets taking place on a large scale in Hong Kong.

With the Hong Kong property market inextricably linked to its economic and financial sector, the potential impact of the Stock Connect on Hong Kong’s Grade-A office market is colossal.

The Stock Connect is the first step in the establishment of what Hong Kong Exchanges and Clearing refers to as the “Mutual Market” of Hong Kong and China, implying the gradual integration of China into the global economy.

It will have an important bearing on structural developments in Hong Kong – China capital markets, which will, in turn, have implications for the development of securities, fixed income, asset management, research, and financial products.

Here's more from CBRE:

Jonas Kan, Head of Hong Kong and China Property Research at Daiwa Capital Markets, commented on how the long-term implications of the Stock Connect cannot be underestimated.

“If only because of the sheer size of China’s M2 and bank deposits, the Stock Connect has the potential to allow China to evolve from its historical role as a capital importer, into an important capital exporter.

It could allow Hong Kong to participate in the reallocation of the USD18tn-plus capital now sitting on the balance sheets of the Chinese banks.”

The Stock Connect will support the expansion of Hong Kong’s financial sector and will give impetus to the city’s Grade-A office market.

“Hong Kong could eventually provide a bridge between China’s otherwise incompatible financial institutional structure and the rest of the world,” said Kan. “The future is likely to see other policies introduced, promoting a high level of financial sector activity. This huge increase in activity will require office space.”

The Stock Connect will reinforce Hong Kong’s role as one of Asia’s most mature financial and professional services hubs and the next five years will see an increased demand for fund raising, stock trading, wealth management and other professional services.

In addition to increased real estate requirements stemming from the organic growth of established enterprises, Hong Kong office landlords will enjoy sustained demand for space from Chinese financial sector companies, and international companies seeking to establish a presence in Hong Kong due to enhanced access to China’s capital markets.