Build it and they won’t come

Budget overview here. More details here. Whole thing here.

If an organization decides not to sell land as part of its annual budgeting process, you would assume it must be a real-estate company. Or, it’s the Hong Kong government. This policy announcement is actually about land use, and shouldn’t be in the budget at all – except our policymakers think they’re running a property business…

The Hong Kong government’s 12-month halt on the sale of commercial land will have limited effect in easing the supply glut in the city’s offices, as the moratorium does too little too late to slow the biggest onslaught of newly completed space in 17 years…

“Taking into account the high vacancy rate of office buildings in recent years and the sufficient supply in the next few years, the budget proposes not to put commercial land for sale next year to allow the market room to absorb the existing supply,” Financial Secretary Paul Chan Mo-po said today. He added that the government may designate some commercial sites for other uses, and provide more flexibility in how the land will be used.

…current oversupply – expected to reach 3 million square feet in the coming months – would take between seven and 10 years to fully digest, said Hannah Jeong, head of valuation and advisory services at CBRE Hong Kong.

…the vacancy rate in grade A offices crept up to 13.3 per cent in January, from 13.2 per cent in December, according to JLL…

…Prime office rents slumped 62 per cent from a peak in October 2018, according to government data, as occupancy was slammed by the anti-government protests, the Covid-19 pandemic and the recession that followed the double-whammy blows. 

…Several new buildings are preparing to open their doors to tenants in the coming months. Sun Hung Kai Properties’ International Gateway Centre in West Kowloon will contribute 2.6 million sq ft.

Looking back, government, developers and investors made a huge mistake assuming that the rapid expansion of Mainland companies’ floorspace in the last decade would go on forever rather than go into reverse.

Some time around 2018, several colleagues of mine were putting together a deal to buy one floor of a second-grade office building in Central (maybe in Melbourne Plaza, or somewhere like that). This was their personal wealth, nothing to do with the company. (The company had in fact bought office space back in the 80s, and was enjoying superior profits to its peers simply because it didn’t have to pay rent.) They were investing around HK$100 million. I haven’t asked how it all went.

Perhaps the most obscure and irrelevant ‘solution’ to the budget deficit is the proposed legalization of gambling on basketball. Some people will wager on anything, so maybe there’s a market. Meanwhile – is any team sport more boring to watch than this? 

Unlike cricket or baseball – when 90% of the time participants are standing around waiting – there is plenty of action in basketball. The problem is that it’s the same action over and over. When the game was invented at a US college in the 1890s, players were just normal students, probably around 5ft 6 to 5ft 10 tall. So getting the ball into a basket 10ft off the ground was a real challenge and test of skill. Nowadays, pro players are usually at least 6ft 4, and quite a few are 7ft. Jumping up to the hoop is so easy for them that teams basically take it in turns to toss the ball into the other’s basket, and you end up with scores like 88-86. The game is a contest of tallness. (For basketball entertainment, check out the Filipino league playing at Lockhart Road Playground on Sundays. No player over 6ft.)

Meandering through the rest of the budget. The big thing, of course, is cost savings. Deficit reduction. Cuts. Belt-tightening. So what do we have? Ah yes: let’s devote a billion bucks to attract tourists from the Middle East. And a billion more for an AI hub-zone institute…

On Tuesday, Secretary for Innovation, Technology and Industry Sun Dong said more than 70 government departments had started to use a locally developed generative AI tool known as “HKGAI V1.”

Powered by China’s AI bot DeepSeek, the AI tool was developed by a research team led by the Hong Kong University of Science and Technology (HKUST).

…The minister said the tool would soon be available for public use, adding he hoped that it would also be available for millions of overseas Chinese in the future.

“In this wave of technology exemplified by artificial intelligence, I am happy to tell you that Hong Kong is not absent,” Sun said in Mandarin. “Hong Kong scientists are great.”

And a one-year civil-service pay freeze.