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9 SEP 2019

Greater Bay Area 2030: Opportunities and challenges over the next decade

The Greater Bay Area (GBA) is a national initiative highlighted in the Chinese government's 13th Five Year Plan, aiming to build a globally competitive mega-region, and by 2035, build a productivity cluster, serving as a key facilitator of the Belt and Road Initiative.

We have partnered with Colliers, a global leader in commercial real estate services, to co-author a detailed report on the GBA. Titled "Greater Bay Area: A 2030 outlook", the joint research looks at future opportunities in the GBA from a real estate supply and demand perspective, layered with consideration of how international operational standards will be adopted throughout the growing workforce and other related developments over the next decade.

"The long-term importance of the GBA is essential to Hong Kong's future success," said Managing Director of Colliers Hong Kong Nigel Smith FRICS, who is also the Vice Chair of RICS Hong Kong Advisory Board. "The anticipated growth over the next decade has the potential to make the region the third biggest economy in the world, highlighting a major demand for real estate and posing a question around the existing supply."

Key findings

Anticipated growth in real estate needs

Property demand for commercial and logistics space should grow throughout the development phase over the next decade to support the targeted economic growth, making commercial and logistics space two of the most attractive sectors for investors and businesses who are interested in capturing GBA opportunities.

Connectivity is key for a mega region

Due to the closer proximity of the GBA cities, travel times between main cities are lower. It takes less than an hour to travel between Hong Kong and Guangzhou, compared to more than 3 hours between New York and Washington.

Skilled labour will be necessary to drive productivity growth

A skilled labour force is a more important contributor to productivity growth in cities than better physical capital. If the GBA is able to close the productivity gap with Silicon Valley and other hi- tech clusters in developed markets, we believe that access to a large skilled pool of labour will be essential for growth to be sustainable.

Hong Kong, Shenzhen and Guangzhou should become the future key office clusters for the GBA

According to Colliers' Hong Kong Annual Occupier Survey 2019, 14% of the Hong Kong office occupiers indicated that they would like to expand into the other GBA cities, while another 20% indicated that they would like to expand their footprint in Hong Kong. The improved connectivity of the cities' ports, which are three of the world's top 10 largest, should result in synergies to facilitate further growth.

Decentralization beyond the border is possible with improving infrastructure

In a recent survey of RICS professionals in Hong Kong, 40% of participants believed that Hong Kong-based companies have started to consider relocating or expanding headcounts into other parts of the GBA. We forecast that there could be a total of an additional 21 million sq meters of office space needed by 2028 given the forecasted economic growth. Given the relative high rents in Hong Kong, emerging office markets across the border such as Nanshan and Qianhai in Shenzhen could serve as more affordable alternatives to Hong Kong for incubators and start-up companies.

Challenges include balancing infrastructure cost & benefit, increasing scale and complexity, and difficulty attracting international talent

In an increasingly complex economic environment, scale could pose a detriment. It will be essential to make the "right investments" as financing for infrastructure projects is a finite resource. As increasing scale comes with increasing complexity, there will likely be limitations to the number of complementary tasks that can be completed by an individual or company. In addition, the differences between the Hong Kong and Chinese economic system, legal structure, and labour costs may become a challenge to attract the right balance of skilled labour into the GBA. Bridging these gaps will be crucial to unlock the untapped potential for the next stage of economic development in the GBA.

City clusters drive sustainable and inclusive economic growth, improve living standards, enhance connectivity, and forge competitive advantage in the global race for talent and investment. The Greater Bay Area project is a unique opportunity for the built and natural environment industry to demonstrate its role in facilitating economic growth and, crucially, great outcomes for people.

Matt Harrison, Global Chief Markets Officer, RICS