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1 HONG KONG REPORT QUARTERLY CONSTRUCTION COST UPDATE SEPTEMBER 2016

2 OFFICES AROUND THE WORLD AUSTRALIA Adelaide Brisbane Cairns Canberra Darwin Gold Coast Melbourne Newcastle Northern NSW Perth Sunshine Coast Sydney Townsville NEW ZEALAND Auckland Christchurch Hamilton Palmerston North Queenstown Tauranga Wellington MIDDLE EAST Abu Dhabi Doha Dubai Muscat Riyadh AFRICA RLB Pentad Gaborone (Botswana) Johannesburg (South Africa) Port Louis (Mauritius) Maputo (Mozambique) Pretoria (South Africa) Cape Town (South Africa) UK Birchwood/Warrington Birmingham Bristol Cumbria Glasgow London Manchester Sheffield Welwyn Garden City Wokingham EUROPE RLB EuroAlliance Austria Belgium Czech Republic Finland France Germany Greece Hungary Ireland Italy Luxembourg Netherlands Norway Poland Portugal Russia Serbia Spain Sweden Turkey CHINA Beijing Chengdu Chongqing Dalian Guangzhou Guiyang Haikou Hangzhou Hong Kong Macau Nanjing Qingdao Shanghai Shenyang Shenzhen Tianjin Wuhan Wuxi Xiamen Xian Zhuhai INDIA Mumbai INDONESIA Jakarta JAPAN Tokyo MALAYSIA Kuala Lumpur PHILIPPINES Cebu Davao Manila SINGAPORE Singapore SOUTH KOREA Jeju Seoul THAILAND Bangkok VIETNAM Ho Chi Minh City CANADA Calgary Toronto CARIBBEAN Bahamas Barbados Grand Cayman St. Lucia USA Austin, TX Boston, MA Chicago, IL Denver, CO Guam, GU Hilo, HI Honolulu, HI Kennewick, WA Las Vegas, NV Los Angeles, CA Maui, HI New York, NY Orlando, FL Phoenix, AZ Portland, OR San Francisco, CA Seattle, WA Tucson, AZ Waikoloa, HI Washington, DC

3 COST COMMENTARY REVIEW OF TENDER PRICE MOVEMENTS IN HONG KONG According to Rider Levett Bucknall s Tender Price Index, which measures tender price movements of builder s works in the private sector in Hong Kong, the tender prices moved upward slightly in the second quarter of On a year-on-year basis, the increase was 1.2%. The following are the second quarter year-on-year tender price movements of builder s works in the private sector in the past five years: % +7.1% +9.1% +6.3% +1.2% Disclaimer: While the information in this publication is believed to be correct at the time of publishing, no responsibility is accepted for its accuracy. Persons desiring to utilize any information appearing in the publication should verify its applicability to their specific circumstances. Cost information in this publication is indicative and for general guidance only and is based on rates at 2nd Quarter Hong Kong s economy grew moderately by 1.7% year-on-year in real terms in the second quarter of 2016, compared with the 0.8% increase in the first quarter of On a seasonally adjusted quarter-toquarter comparison basis, real GDP increased by 1.6% in the second quarter of 2016 over the first quarter of According to the Composite Consumer Price Index, overall consumer prices rose by 4.3% in August 2016 over the same month a year earlier, higher than the corresponding increase (2.3%) in July The seasonally adjusted unemployment rate and underemployment rate stood at 3.4% and 1.4% respectively in June 2016 to August 2016, same as those in May to July The tender prices in Hong Kong have been fluctuating within a narrow range since early this year after six years continual rise. The slower economic growth in will continue to suppress the regional demand of building materials, the prices of which are expected to remain stable. With the gradual completion of major infrastructure works in recent months, contractors have been bidding for projects at a much lower margin. However, the government is still maintaining its housing policy, meaning that land sales will continue, boosting the private sector market. There will also be more public housing projects open for bidding. Therefore, a substantial decline in tender prices in the near future is unlikely. However, a mild decrease over the coming 12 month period is a possibility that cannot be ruled out. Macau According to the Statistics and Census Service of the Macau government, Gross Domestic Product for the second quarter of 2016 decreased by 7.1% year-on-year in real terms. The unemployment rate for May 2016 to July 2016 stood at 1.9%, same as that in April to June The average daily wage of construction workers was MOP788 in the second quarter of 2016, increased by 1.2% on a quarter-toquarter basis. The average daily wages of skilled and semi-skilled workers increased by 1.8% to MOP801 and that of unskilled workers increased by 0.3% to MOP393. With the rapid contraction in Gross Domestic Product (GDP) since the second quarter of 2014, construction activities in Macau have remained weak with construction cost being suppressed. The government is planning to invest a number of infrastructures, social projects and public housing units. Although these works will provide support to the construction industry in the next few years, the total construction output is unlikely to return to the high level seen in the past few years. In the coming months, it is expected that tender prices in Macau will remain weak. Mainland Please refer to our Report which can be downloaded from our website 1

4 HONG KONG REPORT SEPTEMBER TENDER PRICE INDICES IN HONG KONG RLB = Rider Levett Bucknall (Private Sector) ASD = Architectural Services Department (Public Sector) RLB ASD Quarter / Year Graph showing cost trends in the construction industry in Hong Kong based on Tender Prices for Builder's Works 400 TENDER PRICE INDICES RLB ASD RLB ASD RLB ASD RLB ASD RLB ASD RLB ASD RLB ASD RLB ASD RLB ASD RLB ASD RLB ASD RLB ASD Quarter

5 COMMON UNIT RATES IN HONG KONG Description Average Rates in HK$ Unit 3Q2015 4Q2015 1Q2016 2Q2016 Reinforced concrete Grade 40 m, , , , Sawn formwork m Deformed high yield steel bar reinforcement kg mm Solid concrete block wall m Mastic asphalt roofing overall 20 mm thick (2-coat work) on horizontal surfaces 20 mm (Finished) Timber strip flooring including plywood sub-floor, sanding and wax polishing m m Timber skirting 100 mm high x 13 mm thick m mm Solid core flush door faced both sides with 5 mm timber veneered plywood including door frame, architrave, mouldings and painting (excluding ironmongery) Galvanised mild steel in balustrades, railings and general welded and framed work No. 6, , , , kg Structural steelwork - standard sections kg Fluorocarbon coated aluminium windows - frame and hardware including clear float glass and glazing (single-glazed windows) m 2 2, , , , mm Cement and sand (1:3) paving m Coloured unglazed ceramic mosaic floor tiling m Marble slab flooring (mid-range, European origin) m 2 3, , , , Two coats internal lime cement plaster to soffit and beams m Metal panel suspended ceiling m Ceramic / homogeneous wall tiling; internal work m Ceramic mosaic external wall tiling; adhesive fixed (45 x 45 or 45 x 95 mm tiles) Alkali resistant primer and two coats of emulsion paint on plastered walls and ceilings m m Notes: - The unit rates above are for general guidelines of likely tendered rates obtained by competitive tendering for lump sum fixed price contracts with a normal contract period. - The rates are also based on normal site conditions, locations and normal working hours. 3

6 HONG KONG REPORT SEPTEMBER 2016 Office Type of Building Approximate Order of Construction Costs in Hong Kong and Selected Cities in Hong Kong HK$ Macau MOP Beijing (Cost per Square Metre Construction Floor Area at 2nd Quarter 2016 Prices) Chengdu Guangzhou Shanghai Shenzhen High Quality 23,600-33, ,000-22,900+ 7,400-11,000 6,700-9,700 7,200-10,800 7,400-10,800 7,100-10,500 7,100-10,700 6,700-9,700 7,300-10,900 6,700-9,700 6,700-9,700 Medium Quality 18,500-22,700 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Ordinary Quality 15,700-19,900 11,000-14,800 3,850-5,300 3,500-4,600 3,700-4,900 3,850-5,000 3,600-4,750 3,700-5,000 3,500-4,600 3,800-5,100 3,450-4,550 3,450-4,600 Shopping Centre High Quality 29,800-35, ,000-27,900+ 7,700-12,100 6,800-10,600 7,400-11,300 7,600-11,800 7,200-11,100 N/A N/A N/A N/A N/A Medium Quality 22,700-27,800 N/A 6,100-7,700 5,500-6,900 6,000-7,300 6,100-7,700 5,800-7,100 N/A N/A N/A N/A N/A Residential High Rise; High Quality ; 24,400-36, ,900-20,500+ 4,150-5,750 3,700-5,200 4,000-5,500 4,050-5,600 3,850-5,300 4,000-5,400 3,650-5,100 4,100-5,600 3,650-5,100 3,650-5,100 High Rise; Better Quality ; 17,000-19,900 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A High Rise; Ordinary Quality ; 15,400-16,600 8,200-9,900 2,250-3,050 1,950-2,700 2,150-2,900 2,150-2,950 2,100-2,850 2,100-2,950 1,950-2,700 2,150-2,950 1,950-2,700 1,950-2,700 House; High Quality ; 35,500-53,100+ N/A 4,500-6,200 4,000-5,600 4,150-5,900 4,350-6,100 4,100-5,800 4,150-5,900 3,900-5,500 4,450-6,100 3,900-5,500 3,900-5,500 House; Medium Quality ; 23,400-29,400 N/A 2,950-3,850 2,650-3,550 2,850-3,650 2,900-3,850 2,750-3,600 2,900-3,650 2,650-3,500 2,900-3,750 2,650-3,500 2,650-3,500 Clubhouse 32,900-53,800+ N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A External works & landscaping (cost/m 2 external area) Hotel (including FF&E) 4,250-9,100+ N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 5-Star 35,400-43, ,200-36, ,400-16,500 11,300-14,500 12,700-16,400 12,300-16,200 11,800-15,400 11,700-15,600 11,200-14,600 12,200-16,100 11,100-14,600 11,100-14,600 3-Star 29,200-33,700 23,800-26,600 9,300-11,900 8,500-10,700 9,400-11,400 9,200-11,700 8,900-11,200 8,900-11,500 8,500-10,700 9,200-11,700 8,300-10,600 8,300-10,700 Industrial Landlord; High Rise ; 10,100-11,500 N/A 2,550-3,450 2,200-3,100 2,450-3,300 2,450-3,450 2,350-3,200 2,400-3,250 2,250-3,100 2,450-3,400 2,250-3,100 2,250-3,100 End User; Low Rise ; 13,000-19,500 N/A 3,650-6,400 3,250-5,700 3,450-6,300 3,600-6,300 3,350-6,200 3,450-6,200 3,250-5,700 3,600-6,300 3,250-5,700 3,250-5,700 Carpark Basement; up to 2 Levels ; 2 19,200-26, ,800-13,400+ 3,550-6,200 3,500-5,800 3,600-6,300 3,900-6,500 3,600-6,200 3,500-5,900 3,500-5,900 3,600-6,200 3,550-5,900 3,500-5,900 Multi-Storey ; 9,000-10,700 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A NOTES Tianjin Wuhan Wuxi Xian Zhuhai The construction costs above are based on prices obtained by competitive tendering for lump sum fixed price contracts with a normal contract period and are based on normal site conditions and locations. Extra costs should be allowed for projects with fast track programme, non-traditional procurement approaches and multi-phasing completion, etc. The costs are average square metre unit costs only not based on any specific drawings / design. Therefore they provide nothing more than a rough guide to the probable cost of a building. Figures outside the given ranges may be encountered. When information is required on a specific project, it is essential that professional advice be sought. The standards for each type of building in selected cities in do not necessarily follow those in Hong Kong due to local design practices and choice of materials. The building costs exclude furniture, fittings and equipment (except hotel / serviced apartment / clubhouse), site formation and external works, finance and legal expenses, consultants' fees and reimbursables, value of land and fluctuations in prices between the price date as specified above and the time of calling tenders. ( / / ) Construction floor areas are measured to the outside face of external walls (or in the absence of such walls, the external perimeter) of the building & include all lift shafts, stairwells and E&M rooms but exclude lightwells and atrium voids. These areas are usually larger than Architect's calculation of Gross Floor Area (Plot Ratio Area). () ( ) 4 5 Other Specific Exclusions : HOTEL : pre-opening expenses, operating expenses, working capital, staff training and administrative costs SHOPPING CENTRE : fit out to tenant areas INDUSTRIAL; LANDLORD () : security system, air conditioning, electrical distribution in tenant areas; production and warehousing equipment; special M&E provisions PROJECTS IN SELECTED CITIES IN CHINA : utilities to the site beyond site boundary, connection charges and capital contribution; local authority levies and taxation; import duties

7 HONG KONG REPORT SEPTEMBER 2016 LABOUR COST TRENDS AVERAGE DAILY WAGES OF WORKERS ENGAGED IN PUBLIC SECTOR CONSTRUCTION PROJECTS 2,100 2,050 2,000 1,950 1,900 1,850 1,800 1,750 1,700 1,650 1,600 1,550 1,500 1,450 1,400 1,350 Daily Wages (HK$ per day) 1,700 1,650 1,600 1,550 1,500 1,450 1,300 1,250 1,200 1,150 1,100 1,050 1,400 1,350 1,300 1,250 1,200 1,150 1,100 1, , Month / Year Average Daily Wages in HK$ per day Selected Occupations Bar Bender and Fixer 1, , , , , , ,886., , , , , , , , , , , , ,084.2 Concretor 1, , , , , , , , ,902., , , , , , ,864., , , ,932.5 Carpenter (formwork) 1, , , , , , , , , , , , , , , , , , , ,067.9 Painter and Decorator , , , , ,089., , , , , , ,150., , , ,141.8 Plasterer 1, , , , , , , , ,353.,393., , , , , , , , ,381.,388.7 Metal Worker 1,070., , , , , , , , ,146., ,158., , , , , ,153., ,180.5 Plumber 1,092., , , , , , , , , , , , , ,255., ,277., ,296.,285.1 General Workers (Source: Census and Statistics Department) 6

8 MATERIAL COST TRENDS AVERAGE WHOLESALE PRICES OF SELECTED BUILDING MATERIALS 6,000 8,500 5,500 8,000 5,000 7,500 4,500 7,000 4,000 6,500 Costs of Materials (HK$) 3,500 3,000 2,500 6,000 5,500 5,000 2,000 4,500 1,500 4,000 1,000 3, , Month / Year Average Wholesale Prices of Selected Building Materials Building Materials Sand ($/10 t) 1,180 1,190 1,200 1,290 1,450 1,450 1,480 1,460 1,400 1,410 1,380 1,530 1,650 1,890 1,380 1,070 1,190 1,220 1,220 1,220 Bitumen ($/t) 8,350 8,250 8,200 7,950 7,900 7,900 7,900 8,000 8,000 7,917 7,850 7,750 7,600 7,150 7,017 6,750 6,583 6,167 5,650 5,450 Portland Cement ($/t) Sawn Hardwood 50x75 ($/m 3 ) 5,707 5,707 5,707 5,707 5,707 5,707 5,707 5,707 5,707 5,707 5,707 5,707 5,707 5,707 5,707 5,707 5,707 5,707 5,707 5,707 Mild Steel Round Bars ($/t) 5,490 5,470 5,438 5,360 5,291 5,270 5,285 5,270 5,215 5,180 5,165 5,125 5,090 5,073 5,054 5,059 5,270 5,380 5,450 5,255 High Tensile Steel Bars ($/t) 4,427 4,349 4,208 4,073 3,970 3,930 3,900 3,792 3,713 3,643 3,524 3,355 3,333 3,242 3,157 3,200 3,466 3,905 3,844 3,570 (Source: Census and Statistics Department) 7

9 HONG KONG REPORT SEPTEMBER 2016 Liquidated & Ascertained Damages vs. Preliminaries Cost 400,000 Preliminaries Cost per Day (HK$) 350, , , , , ,000 50, , , , , , , , , ,000 Rate per Day of Liquidated & Ascertained Damages (HK$) Contract Sums : < $200M $200M - $400M $400M - $600M $600M - $800M $800M - $1,000M > $1,000M The graph shows the relationship between the Rate per Day of Liquidated & Ascertained Damages and the Preliminaries Cost per Day of the selected projects. For simplicity reason, the Preliminaries Cost per Day is calculated by dividing the total preliminaries cost by the contract period in calendar days of each project. Liquidated & Ascertained Damages are genuine pre-estimates of the loss suffered by the Employer if a contractor fails to meet the contract completion date. They are usually calculated based on a rate per day under the contract conditions. Preliminaries costs are contractor s prices on items not covered by the trade works. The majority of the preliminaries costs are time related, such as contractor s site team, insurance, site accommodation, temporary water and electricity, safety management and watchmen, plant operation costs, progressive setting-out and site cleaning, etc. A contractor may be able to recover time related preliminaries costs in the event of an extension of time granted in accordance with the contract conditions. Disclaimer All cost data and other information are for general reference purposes only without being necessarily applicable to specific sites, developments or projects of any particular individual or company. 8

10 OFFICES IN HONG KONG, MACAU AND MAINLAND CHINA HONG KONG 20th Floor Eastern Central Plaza 3 Yiu Hing Road Shaukeiwan Hong Kong SAR 3 20 Telephone : Facsimile : [email protected] BEIJING Room , 18th Floor East Ocean Centre 24A Jian Guo Men Wai Avenue Chaoyang District Beijing A Telephone : Facsimile : [email protected] CHENGDU 29th Floor Square One No.18 Dongyu Street Jinjiang District Chengdu Telephone : Facsimile : [email protected] CHONGQING Room , 30th Floor Metropolitan Tower No 68 Zourong Road Central District Chongqing Telephone : Facsimile : [email protected] DALIAN Room 1103 Xiwang Tower 136 Zhongshan Road Zhongshan District Dalian Liaoning Province Telephone : Facsimile : [email protected] GUANGZHOU Room 601 Taikoo Hui Tower Tian He Road Guangzhou Guangdong Province Telephone : Facsimile : [email protected] GUIYANG Room E, 12th Floor Fuzhong International Plaza 126 Xin Hua Road Guiyang Guizhou Province E Telephone : Facsimile : [email protected] HAIKOU Room 1705, 17th Floor Fortune Centre 38 Da Tong Road Haikou Hainan Province Telephone : Facsimile : [email protected] HANGZHOU Room 2306 Green Town Deep Blue Plaza No. 203 Zhao Hui Road Hangzhou Zhejiang Province Telephone : Facsimile : [email protected] MACAU Alameda Dr. Carlos D Assumpção No. 398 Edificio CNAC 9¼ Andar I-J Macau SAR I-J Telephone : Facsimile : [email protected] NANJING Room 1202, South Tower, NIC 201 Zhong Yang Road Nanjing Jiang Su Province Telephone : Facsimile : [email protected] QINGDAO Room 2019, 20th Floor Parkson Commercial Plaza Zhongshan Road Shinan District Qingdao Shandong Province Telephone : Facsimile : [email protected] SHANGHAI 22nd Floor, Greentech Tower No.436, Heng Feng Road Zha Bei District Shanghai Telephone : Facsimile : [email protected] SHENYANG 25th Floor Tower A, President Building No. 69 Heping North Avenue Heping District Shenyang Liaoning Province 69 A Telephone : Facsimile : [email protected] SHENZHEN Room Shun Hing Square Diwang Comm. Centre 5002 Shennan Road East Shenzhen Guangdong Province Telephone : Facsimile : [email protected] TIANJIN Room 502, 5th Floor Tianjin International Building 75 Nanjing Road Heping District Tianjin Telephone : Facsimile : [email protected] WUHAN Room 2301 New World International Trade Centre No. 568 Jianshe Avenue Wuhan Hubei Province Telephone : Facsimile : [email protected] WUXI Room Juna Plaza No. 6 Yonghe Road Nanchang District Wuxi Jiangsu Province Telephone : Facsimile : [email protected] XIAN Room 2906, 29th Floor Digital Plaza Hi-Tech International Business Centre 33 Keji Road Xian Shaanxi Province Telephone : Facsimile : [email protected] ZHUHAI Room 3108, 31st Floor Everbright International Trade Centre No. 47 Haibinnanlu, Jida, Zhuhai Guangdong Province Telephone : Facsimile : [email protected]

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