REAL ESTATE - A Century of Transformation


Founded 100 years ago in New York by a couple of brothers-in-law, Cushman & Wakefield is a global real estate services provider with 45,000 employees in more than 70 countries. In a conversation, John Siu, Managing Director for Hong Kong, tells us his story of joining the firm in 1996 and shares his insights about the Hong Kong property market 

By Kenny Lau

John Siu, second left, Managing Director for Cushman & Wakefield’s Hong Kong office, is responsible for over 300 staff, overseeing multiple functions in brokerage and other professional services.

What is your professional background?

I started my career in real estate after graduation from HKU in 1989. I was an office broker of another real estate service provider, with a focus on office leasing, sale and purchase transactions. I also handled landlord representation assignments, including Metroplaza, a twin tower office development in Kwai Chung developed by Sun Hung Kai Properties. It was a pioneer of decentralized Grade A office development in the early 1990s.

I joined Cushman & Wakefield in 1996 as a senior broker, focusing on landlord leasing instructions for office development and later tenant representation. In the early 2000s, I was Account Director serving corporate clients in the region, an exciting opportunity to deepen my relationship with colleagues and clients in APAC, EMEA and the Americas.

I also ran the leasing team of our Hong Kong office where revenue doubled within three years. From 2007 to 2015, I served as Head of Cushman & Wakefield’s Hong Kong office and took responsibility for our Guangzhou and Shenzhen offices for a few years. Since the merger with DTZ in September 2015, I have been overseeing a team of 300-plus in brokerage and professional services as well as other support functions.

What do you find attractive about the industry?

I like beautiful architecture, and I like real products that I can see, touch and use. Real estate carries a lot of weight in today’s economy, and it is one of the most important investment tools.  I can see a life-long career in the industry, and I am certainly proud to have helped clients transform the way people work, shop and live in the past 28 years.

What is the history of Cushman & Wakefield? Why is Hong Kong an important market?

Today, Cushman & Wakefield is among the largest commercial real estate services firms with revenue of US$6 billion. It was founded in New York in 1917 by brothers-in-law J. Clydesdale Cushman and Bernard Wakefield – 2017 marks the 100th anniversary of our brand. That is, 100 years of taking our clients’ ideas and putting them into action. 

Hong Kong is a leading city in the APAC region, and multinational corporations have chosen Hong Kong as their regional headquarters for its free economy, low tax rates, well-established legal system and English-speaking workforce. The Hong Kong government has created a solid platform here to allow free capital inflow and outflow for both local and international players.

From a real estate perspective, investors like the high level of transparency and liquidity of the Hong Kong market, and occupiers like the range of products at different price levels in all real estate sectors. Under the “One Country, Two Systems,” Hong Kong is a gateway city for multinational corporations to enter the China market and for mainland Chinese companies to extend their footprint outside China.

It’s also why we have created a “China Business Platform” in Hong Kong to identify and capture the potential business opportunities from mainland Chinese corporations looking to expand in Hong Kong and in the other major markets across the globe.

How does real estate serve as a vehicle of investment?

Investors usually look for return on real estate investments from two perspectives, namely rental income and capital gain. When a property is leased to a tenant, the investor holding the property will benefit from the recurring rental income (which is relatively stable and predictable).

While holding the property, the value of the property may appreciate over time and create potential capital gains (which can be more unstable and unpredictable depending on the market). Investors may enhance their return on investment by repositioning the tenant mix, changing the permitted uses, refurbishing the building facilities or redeveloping the building.

How closely tied is Hong Kong’s market to the global economy?

The Hong Kong residential and commercial markets are a lot more volatile and open than any other major city in the world, with substantial capital and rental value fluctuations within a short period of time. Unlike some other cities, there is no restriction on foreign ownership.

The Grade A office leasing market in Greater Central is highly dependent on the global economy. Rents dropped 45 percent within a year following the financial crisis in September 2008, and rebound by 82 percent within two years from September 2009 when the US economy started to recover gradually. Rents also dropped by 22 percent over 12 consecutive quarters beginning in Q4 2011 due to the European sovereign debt crisis, and a recovery only began in late 2014.

How’s the current HK market performing? What was most striking in 2016?

Both capital and rental values of office and residential properties are currently at record high levels. Obviously, it is the result of the current imbalanced real estate market conditions – with demand outpacing supply, particularly in core locations. Some local, Chinese and overseas investors are still looking for investment opportunities in the Hong Kong office and residential sectors. 

The dominant position of mainland Chinese investors and occupiers in the Hong Kong office sector was a major development in 2016. In Greater Central, their purchases accounted for 26 percent of office transactions (consideration over HK$100 million), and occupiers contributed 60 percent of the major new lettings (more than 10,000 sq. ft.). The aggressive attitude of Mainland Chinese developers in government land sales (mainly residential sites) was also very eye-catching.

Mainland Chinese occupiers have maintained their dominance in the office leasing market, and they accounted for 37 percent of the major new office lettings in Greater Central in Q1 2017.

Given the lack of supply in the area, rents continue to find support from the strong demand, although we are seeing a trend of decentralization among traditional occupiers such as law and other professional services firms.

Will rising US Fed rates have an immediate impact on the market?

The US Fed rates will have minimal impact on the Hong Kong commercial and residential markets in the short-term as the mortgage interest rates currently offered by banks in Hong Kong remain unchanged, even though the US Fed rate has increased by 50 basis points since mid-December 2016.

However, we do expect that when the interest rate gap between USD and HKD becomes wider (probably in Q4 2017 or Q1 2018), banks in Hong Kong will be required to follow the pace of US Fed rate increase. As a result, the increase in mortgage interest rates in Hong Kong will have a cooling effect on investment activity and pricing levels of both commercial and residential markets.