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Impact of service sector on office space construction and use : the case of Hong Kong

by Wadu, Mesthrige Jayanthe

Abstract (Summary)
(Uncorrected OCR) Abstract of thesis entitled

Impact of Service Sector on

Office Space Construction and Use: The Case of Hong Kong

submitted by

Wadu Mesthrige Jayantha

for the degree of Doctor of Philosophy at the University of Hong Kong

in December 2002

During the last two decades, the service sector of Hong Kong's economy has experienced a remarkable growth, with a significant increase in the activities of the financial and business services sectors. This economic transformation has had a major impact on the office property market in Hong Kong. The main objective of this thesis is to examine the impact of the growth of the service sector on the office space market, with special reference to the causality relationship between service sector growth and office space development, the mechanism that helps to transmit changes in service sector growth to the office space market as a lead-lag process, as well as the quality and location of office space demanded. The period of study is 1984 through 2000.

The Four-Quadrant Model and the Accelerator Theory of Investment are used to show the long-term lead-lag relationship between service sector growth and office space development. The Granger causality approach based on cointegration and error correction models is thereafter adopted to explore the above relationships. Empirical findings suggest that among the service sub-sectors, only the finance, insurance, real estate (FIRE) and business service sub-sector has a significant impact on office space development. The study shows that the growth of FIRE and business service sector firms has a delayed impact on office space development activities. It takes about two years to channel these

effects. The study also shows that lagged land supply could cause delays in the completion of new office spaces. Space per employee also emerges as a significant indicator of demand for space.

The growth pattern of the FIRE and business service sector firms as the major office service sector should be examined carefully in order to identify future needs of office space development in terms of extent, quality and location. The findings based on a sample survey reveal that FIRE and business service sector firms opt for better quality space in convenient locations, especially offices with advanced IT facilities. Within the FIRE and business service sector, high occupancy costs have not deterred many finance firms from remaining in the CBD. To avoid high occupancy costs, business service and insurance firms however moved towards the Eastern District, though, not far from the CBD. Availability of high quality space helps to make a location attractive for tenants from practically all sectors and promotes decentralization of offices.

Bibliographical Information:

Advisor:

School:The University of Hong Kong

School Location:China - Hong Kong SAR

Source Type:Master's Thesis

Keywords:office buildings economic aspects china hong kong service industries

ISBN:

Date of Publication:01/01/2003

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