Hong Kong Office Leasing Guide

Asia Pacific Properties Market Report Hong Kong Office Leasing Guide July 2015 Proud Member of

Terminology 1. GRADES GRADE A Highest quality building in prime locations with state-of-the-art specifications and highly sought after by the high-profile companies. GRADE B These buildings fall just below Grade A buildings and have slightly lesser specifications and quality. They are typically older and just outside prime office locations. GRADE C These are older office buildings with low specifications and less appealing to many companies. They are typically sought after for cost conscious firms who feel the need to not be centrally located in the heart of business districts. 2. LEASING TERMINOLOGY GROSS FLOOR AREA (G) In most buildings, gross floor area is the common method of measurement. It is the area within the perimeter of the outside walls including wall thickness, service core including lift lobbies, passenger and service liftwells, staircases, lavatories, pantries, mechanical, and electrical areas. LETTABLE AREA (L) The net area plus a percentage of common usable area such as lift lobbies and toilets (apportioned if the floor area is sub-divided). Lettable to net efficiency is generally 80-90%. NET AREA (N) Sometimes referred to as the usable area or carpeted area, the total net area of the premise is measured from the inside walls and excludes internal structures. EFFICIENCY (NET/GROSS AREA RATIO) Most buildings in Hong Kong have an office efficiency of 70%-80%, depending on internal structures that decreases the usable area of an office space. Building units are typically given in gross area square footage with efficiency (for example) of 70% efficiency which then calculates the Leasing Terminology And Costs General Market Practices usable area or net area. OPTION TO RENEW In addition to the initial lease term, some landlords, in exceptional cases, may grant to a coveted tenant user an option to renew for a further term at a rent either pre-agreed upon by both parties or at prevailing market rent at the time of renewal. EARLY TERMINATION Early Termination is usually not allowed on the fixed lease period. In some cases, early termination might be allowed based on mutual agreement or by finding a replacement tenant. REINSTATEMENT In almost all cases, tenants are contractually required to reinstate the premises to its original condition and remove all alterations prior to handing back the premises to the landlord. LANDLORD S PROVISION These are the fixtures and/or fittings provided by the landlord free of charge. Sprinkler system for fire protection, basic air-conditioning apparatus and false ceilings are commonly provided. RENT FREE PERIOD Tenant may be entitled to a rent-free period granted for fit-out works. The average rent-free period is two weeks to two months for two year leases, but may vary according to the size and lease term of the office space taken. 3. COSTS INCLUDED WITHIN A LEASE RENT Rental rates are generally quoted per square foot and payable monthly in advance. SECURITY DEPOSIT Upon the execution of the Tenancy Agreement (TA), tenants are required to pay a security deposit of three months total sum of the following: rental plus management fee, government rates (estimate) and other chargers, if applicable. MANAGEMENT FEE Management fees for Grade A and B office space can range from HK$4- HK$12 per square foot gross per month, depending on age and location of the building. Management fees pay for cleaning and maintenance for common areas and general building upkeep. They typically also include central air-conditioning costs during normal office hours and half-days on Saturdays, though not in all cases. LEGAL COSTS Tenants are to bear their own legal costs and are advised to consult their solicitors to ascertain actual fees. STAMP DUTY The tax payable to the government is calculated based on the rental price and the length of the lease term. Normally stamp duty tax is shared equally by landlord and tenant. For lease terms of 1-3 years, the stamp duty is 0.5% of the average annual rental, and for lease terms over 3 years, the rate is equal to 1%. UTILITY COSTS & TELECOMMUNICATION Tenants are required to apply for a separate electricity and water account for the premise, if applicable. Deposits shall be paid directly by the tenant to the utility providers. Tenants are solely responsible for the installation and service charges of telecommunication usage in their own premises. FIT-OUT COSTS Estimated fit-out cost is approximately HKD200-HKD500 per square foot of net area for standard finishing, and up to HKD1,000 per square foot for top-end offices in Grade A buildings. Tenants are required to obtain approval from the landlord for the lay-out plan. Some landlords may have a provision for the vetting fee for amendments, approval for the lay-out and the monitoring of the progress. There is a deposit required to ensure no damage is made to the common areas of the building.

Market Rental Price And Vacancy Hong Kong Office Vacancy Rates further drift of companies on fringe Hong Kong Island relocating to new supplies on Kowloon East. Percentage 9.00 8.50 8.00 7.50 7.00 6.50 6.00 5.50 5.00 4.50 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00 Central & Admiralty Sheung Wan VACANCY RATES & DEMAND The office leasing market remained stabled into Q4 of 2014, though we are seeing some contraction by firms that aggressively expanded in 2012-13 on the hopes of strong growth in China (which has been tempered). Consequently, with the uncertainty of future growth plans, corporations are seeking flexible solutions, such as serviced offices. This led to serviced office groups growing strongly and taking up large floor area throughout Hong Kong. Despite the fact that the financial sector are more cost-conscious, the large take ups from serviced office groups and other unconventional office users such as medical and semi-retail sector on these prime location continued to maintain the stability of the overall vacancy rate throughout Hong Kong. Vacancy rate of Central remained stable at 3.5%, where mid-sized companies driving majority of the leasing activities with internal expansion and consolidation. With the increasing demand from other non financial sectors, the vacancy rates of non CBD such as Tsim Sha Tsui down to 2.5% and Kowloon Bay down to 3%. Q2, 2014, 2014 Q4, 2014, 2015 Causeway Bay & Wan Chai s North Point & Quarry Bay SUPPLY A total of 1,885,200 sq.ft. of Grade-A office space was completed in 2013-2014, of that amount on 130,000 sq.ft. of office space is on Hong Kong Island, of which 80% had been absorbed within 2014. Majority of future supply will be on Kowloon East, with the lack of future supply on Hong Kong Island, where the only significant future supply is on Island East - Taikoo Place redevelopment (available in 2017-2018), we foresee Avg. Rent (PSF/MTH) 110.00 100.00 90.00 80.00 70.00 60.00 50.00 40.00 30.00 20.00 TST Kowloon East Central Sheung Wan Causeway Bay / Wan Chai Tsim Sha Tsui North Point / Quarry Bay RENTAL RATES Hong Kong Average Office Rental Rates (By ) Global economic uncertainties and additional signs of slowing growth in China are continuing and may foreshadow a downturn in demand and consequently a downturn in rental rates. The views are mixed on rental rate forecasts across Hong Kong. Recent reports suggest office rents in corebusiness districts will see a meaningful decrease and market correction through 2014, which may provide an opportunity for tenants to obtain Grade-A office space at rates that are attractive. Other industry professionals remain optimistic about Hong Kong s resiliency and suggest there will be no significant rental rate decreases in core business districts. The answer may hinge not on external economic factors but on the outcome of several substantial lease negotiations currently underway: a failure of those negotiations to achieve renewals at present space requirements may cause the return of a substantial amount of empty space to the market, and landlords may be forced to lower rents to maintain their buildings occupancy levels. Graphs source: Rating and Valuation Department, Hong Kong 10.00 0.00 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Year / Quarter

Business s Major Business s Kowloon Bay Kwun Tong Kowloon Tsim Sha Tsui Sheung Wan Central Admiralty Wanchai Causeway Bay North Point Quarry Bay Image is not in scale Air Express Line Island Line Kwun Tong Line Tsuen Wan Line Tsueng Kwan O Line Tung Chung Line 0 Interchange MTR Station o MTR Station

Sheung Wan Sheung Wan, historically one of the original settlements by the British, is situated just north-west of the core business district of Hong Kong, Central, and only one stop away on the Island line MTR system. The district is regarded as more of a local location for businesses with many shops, restaurants, and historical buildings from the British occupation. Sheung Wan is preferred by many as a cost effective location that is still in close proximity to the Central. The Center 55-76 26,000 (G) 1998 Cosco Tower 55-56 22,000 (G) 1997 Nan Fung Tower 50-58 10,179 (G) 1973 One8One Queen's Road Central 48-55 15,451 (G) 1998 Infinitus Plaza 48 11,899 (G) 1987 Shun Tak Centre 44-67 23,956 (G) 1985 Wing On Centre 44-52 18,740 (G) 1977 Golden Centre 43-46 5,385 (G) 1991 Beautiful Group Tower 42-47 3,904 (G) 2002 FWD Financial Centre 42-47 8,016 (G) 1994 China Insurance Group Building 40-42 6,730 (G) 1967 Kai Tak Commercial Building 33-35 5,000 (G) 1974 The Pemberton 33 2,814 (G) 2006 China Merchants Building 27 4,620 (G) 1979 EIB Centre 25-35 3,457 (G) 1999 Bangkok Bank Building 25 3,565 (G) 1991 DBS Bank, Goldman Sachs, Compass Serviced Offices, Samsung Electronics, Maples & Calder, Ogilvy & Mather Group SHKP, Henderson, Sino Land, Strata-titled To Central (by metro) Duration 3 min Costs HKD4.50 To Airport (by metro) Duration 36 min Costs HKD104.50

Central Central is considered as the Central Business (CBD) in Hong Kong. Most of the newly completed Grade A buildings are concentrated in Central. It is also a preferred location for financial and banking institutions, hedge funds, legal firms supporting the financial sector, and multi-national corporations. Grade A office rents are traditionally the highest in Hong Kong, led by new developments on reclaimed areas such as the International Finance Centre. Chater House 165 18,397-19,070 (N) 2002 York House 155 8,100-8,200 (N) 2006 One & Two International Finance Centre 150-170 21,000-23,000 (L) 2003 One, Two & Three Exchange Square 150 10,800-12,000 (N) 1988 Cheung Kong Center 145-155 20,157-22,454 (L) 1998 The Landmark 140 12,100-13,200 (N) 1980 Jardine House 135 14,400-15,500 (N) 1972 Alexandra House 130 11,000-11,800 (N) 1976 CCB Tower 125 6,900-7,400 (G) 2012 Prince's Building 120 20,800-21,200 (N) 1965 8 Queen's Road Central 92 3,012 (L) 2000 Citibank Plaza 88 12,781-17,575 (L) 1992 Bank of China Tower 85-95 6,095-18,500 (L) 1990 Hong Kong Club Building 85 8,688 (L) 1984 Man Yee Building 82-84 7,326-11,482 (L) 2000 Macquire Group, Jardine Matheson, Hutchison Whampoa, Bank of America, J.P. Morgan Chase, HSBC Holdings, Crédit Agricole (Suisse) SA, Agricultural Bank of China, Bank of China, Citibank Hong Kong, Hang Seng Bank, Standard Chartered Bank, UBS AG, SFC, Royal Bank of Scotland SHKP, Hongkong Land, Sino Land, Great Eagle, Strata-title To Airport (by metro) Duration 33 min Costs HKD100.00

Admiralty Admiralty is another extension of Central, lying to the east of Central, one subway stop away. Because it is the location of the High Court, it is historically the preferred location for legal firms. Admiralty is also home to various 5-star hotels. It is a small district with only a few modern office buildings and a popular shopping mall. One & Two Pacific Place 110-115 24,000-25,800 (G) 1988-1990 Far East Finance Centre 85-90 10,800 (G) 1982 CITIC Tower 68 14,700 (G) 1997 United Centre 48 20,000 (G) 1981 Lippo Centre Tower 1 & 2 45-68 12,500-14,890 (G) 1986 Admiralty Centre Tower 1 & 2 38-58 18,469-20,318 (G) 1980 Deliotte, Baker & McKenzie, CCB International Holdings, The Carlyle Group, ENN Energy, Mircosoft Hong Kong Swire Properties, Citic, Strata-title To Central (by metro) Duration 3 min Costs HKD4.50 To Airport (by metro) Duration 36 min Costs HKD104.50

Wan Chai / Causeway Bay Moving East from Admiralty, Wan Chai (WC) was historically a red light district but has undergone substantial gentrification in the last 20 years. Many major government departments and international consulates are located in Wan Chai, as well as Hong Kong s primary convention center. Meanwhile, Causeway Bay (CB) is a retail center and considered a paradise for shopping and entertainment. Offices located in these two districts are more affordable than in Central though at a slightly discounted level of prestige. Disney, Société Générale, ICBC International Holdings, Noble Group, China Resources National, Sinopec (HK) Limited, Samsung Electronics, Daimler, Inchcape Far East Company Ltd, Nippon Telegraph & Telephone Corp., AT&T, Intel, KPMG, PepsiCo, Google Three Pacific Place WC 92-95 18,471 (G) 2004 Hysan Place CB 90 17,500 (L) 2012 Lee Garden One CB 68 16,544 (L) 1997 28 Hennessy Road WC 65 4,900 (G) 2012 Harbour Centre WC 60-68 14,500 (G) 1983 Central Plaza WC 58-75 20,000 (G) 1992 Sun Hung Kai Centre CB 58-68 16,600 (G) 1981 Lee Garden Five CB 56-57 5,044 (L) 1990 Hopewell Centre WC 55-66 13,500 (G) 1984 World Trade Centre CB 53-58 12,770 (G) 1975 Lee Garden Two CB 53 14,626 (L) 1992 Leighton Centre CB 49 11,496 (G) 1976 One Hysan Avenue CB 48 5,700 (L) 1993 Times Square, Tower 1 & 2 CB 45-59 17,000-19,000 (G) 1993 Windsor House-ACE Tower CB 42-49 19,055 (G) 1979 Shui On Centre WC 41-60 11,280 (G) 1987 Sino Plaza CB 40-55 13,022 (G) 1992 Harcourt House WC 40-48 14,000 (G) 1985 AXA Centre WC 38-40 12,750 (G) 1982 Hysan, SHKP, Swire Properties, Harriman, Sino Land, Strata-title To Central (by metro) - WC / CWB Duration 5 min / 7 min Costs HKD4.50 / HKD5.50 To Airport (by metro) Duration 38 min / 41 min Costs HKD104.50 / HKD105.50

Island East Island East comprises North Point (NP) and Quarry Bay (QB), two areas that are attracting more tenants with lower rents than in their cousin districts to the west. In Quarry bay in particular, new office towers and substantial urban planning improvements are continuous with newly built/future planning for grade A office spaces within the Taikoo Place cluster, adjacent to the Quarry Bay MTR Station. Built by a major developer, major office buildings are linked by an elevated walkway. North Point is considered as a residential district for working class. The district has a limited supply of Grade A & B office buildings but still attracts major tenants for their attractive prices and open views. AIA Tower NP 50 14,425 (G) 1998 Cityplaza QB 48 19,000-26,300 (G) 1991 Berkshire House QB 48 13,734 (G) 1998 Taikoo Place QB 45-70 7,074-38,857 (G) 1993-2008 633 King's Road NP 35-36 11,821 (G) 2007 Prosperity Millennia Plaza NP 32-35 8,867 (G) 1999 625 King's Road NP 32 11,821 (G) 1998 Citicorp Centre NP 31-33 11,000 (G) 1983 @Convoy NP 30-37 10,800 (G) 1991 148 Electric Road NP 28-31 8,205 (G) 2000 Olympia Plaza NP 27-28 7,882 (G) 1999 K Wah Centre NP 25-33 13,498 (G) 1991 Two Chinachem Exchange Square NP 23 9,432 (G) 1999 For NP: HKU Space Campus, AIA Insurance, Duravit, Wyeth For QB: Lenovo, Fuji Xerox, City- Bank Call Center, DBS Call Center, PCCW, Swire Travel, Jessica Magazine, IBM, Heineken, Kingfisher For NP: Swire Properties, ChinaChem, Cheung Kong, Sino Land, Henderson For QB: Swire Properties, Citic, Kerry To Central (by metro) - NP / QB Duration 13 min / 15 min Costs HKD7.50 / HKD7.50 To Airport (by metro) Duration 46 min / 48 min Costs HKD107.50 / HKD107.50

Tsim Sha Tsui / Kowloon West Tsim Sha Tsui, situated on the southernmost tip of Hong Kong s mainland, has become a preferred choice for corporations, particularly sourcing and manufacturing firms, with clientele located in Kowloon, New Territories and/or Mainland China given its access rail line to Shenzhen, comprehensive MTR stations throughout Kowloon and wide variety of cost effective office buildings. Kowloon West is home to the tallest building in Hong Kong, the International Commerce Center (ICC), with similar specifications to IFC. ICC was completed in 2010 and has become a secondary financial center with leading multinational finance firms as the majority of its tenants. International Commerce Centre 78-83 31,182-38,864 (L) 2010 World Commerce Centre 60 18,212 (G) 1982 Tsim Sha Tsui Centre 45 32,000 (G) 1980 The Gateway 43-62 26,050-55,800 (G) 1994 Silvercord Tower 42-51 22,600 (G) 1983 Empire Centre 40 22,000 (G) 1981 Ocean Centre 38-50 17,500 (G) 1977 Lippo Sun Plaza 38-40 25,860 (G) 1988 World Finance Centre 38 18,500 (G) 1982 China Hong Kong City 33-39 21,100 (G) 1988 Natixis, Morgan Stanley, ING, Deutsche Bank, Credit Suisse, Prudential, DHL, General Luxury Brands SHKP, Sino Land, Harriman To Central (by metro) - TST / KL Duration Costs 6 min / 12 min HKD10.00 / HKD10.00 TST To Airport (by Metro) Duration Costs 44 min HKD70.50 Kowloon Station To Airport (by Metro via Tsing Yi) Duration Costs 22 min HKD90.00

Kowloon East Kowloon East (historically an industrial area) is developing as an emerging business district with very attractive rental rates relative to the core CBD of Central. The government has laid out inclusive plans for a CBD2 complete with low cost housing, commercial and residential space, as well as more green space and light rail throughout the core. Current redevelopment consists of shifting industrial space to office, and with Grade-A rents at 30-40% the cost of Central as well as additional buildings under construction or planned, it is an attractive option for back-offices and companies that need not be near the financial center. One Kowloon 42 24,000 (G) 2006 C-Bons International Centre 37-39 16,233-16,830 (G) 2010 Manhattan Place 34-37 21,180 (G) 2008 Landmark East - Tower 1 & 2 28-38 14,300-28,000 (G) 2008 Enterprise Square 28-35 9,420-18,446 (G) 1992-2007 Manulife Financial Centre Tower A & B 28-33 65,376 (G) 2007 Exchange Tower 27-32 26,686-27,983 (G) 2008 Millennium City 24-35 8,140-25,500 (G) 1998-2007 Skyline Tower 24-25 23,475-28,292 (G) 2003 Chevalier Commercial Centre 21-30 32,000 (G) 1992 Nan Fung Commercial Centre 18 30,914 (G) 1993 For KB: AIA Insurance, Esprit, SCMP, Santa s Best, Nike, Wai Yuen Tong, HSBC, DHL, HSB For KT: Standard Charter, Best Choice, BEA, Manulife, Adidas, Reebok, Lenscrafters For KB: Kerry, Nan Fung & Sino Land For KT: SHKP, Harriman & Sino Land To Central (by metro) - KB / KT Duration 29 min / 27 min Costs HKD14.00 / HKD14.00 To Airport (by Metro via Tsing Yi) Duration 52 min / 56 min Costs HKD70.50 / HKD70.50

Contact Information commercial@ www. HEADQUARTERS 14/F Wilson House 19-27 Wyndham Street Central, Hong Kong tel +852 2281 7800 fax +852 2810 6981 EAA License: C-002320 SHANGHAI OFFICE Suite 601 Plaza 66 Phase 2 1366 Nanjing Xi Road Shanghai 200040 P.R. China tel +8621 6288 7333 fax +8621 6288 7371 Beverly LW Sunn President sunn@ Joshua Miller Director joshua.miller@ Albert Chan Manager - Hong Kong Commercial Division albert.chan@ BEIJING OFFICE Unit 703A The Exchange Beijing 118B Jian Guo Lu, Chao Yang Beijing 100022 P.R. China tel +8610 6567 8177 fax +8610 6567 8171 Roland Burton Associate Director - Shanghai Commercial Division roland.burton@ GUANGZHOU OFFICE Unit 841 The Garden Tower 368 Huanshi Dong Lu Guangzhou 510064 P.R. China tel +8620 8365 2922 fax +8620 8365 2923 Geoffrey Guo Manager - Shanghai Commercial Division geoffrey.guo@ Joyce He Assistant Manager - Shanghai Commercial Division joyce.he@ GVA Worldwide is a growing partnership of independent commercial real estate companies serving over 50 markets throughout Europe and Asia. For further information visit www.gvaworldwide.com GVA Worldwide optimises client portfolios locally and around the world. It serves the real estate needs of clients including occupiers, multi-national corporations, major space users, developers, owners, institutions, lenders and investors. The particulars are set as a general guide. Although every care has been taken to ensure that the information is correct at the time of printing, prospective lessees are advised to satisfy themselves on the accuracy of all statements. All rights reserved. No part of this publication may be reproduced in any form without the prior permission of Asia Pacific Properties.