hpa – partnership with Malaysian design consultancy Carnaby Group

China’s plan to revitalise the old Silk Road through the Belt and Road Initiative has inspired a Hong Kong design firm to get a jumpstart.

Hong Kong-based architectural consultancy hpa (previously known as Ho & Partners Architects Engineers & Development Consultants Ltd) has re-entered the Southeast Asian market, following the launch of a new office in the region in October 2016 by partnering with Malaysian design consultancy Carnaby Group. The 35-year-old firm built its reputation with major projects on the Chinese mainland, but is expanding further in the region. Nicholas Ho, Managing Director of carnaby hpa studio, says the time is ripe to refocus efforts on developing the fast-growing Southeast Asian market.

Tell us about the merger with Malaysian design firm Carnaby Group.

We have always been interested in Southeast Asia and wanted to expand our presence there since our Singapore and Bangkok days back in 1997. So we went back in 2014, to Malaysia, with a clear vision to build a one-stop property professional services platform: we would do the architecture, interior, master planning, sales, investment advisory, branding and marketing.

But we came to the conclusion that doing everything yourself in a foreign market would be inefficient. We then met Carnaby, a 20-year-old Malaysian company that is very strong at interior design and build, property branding and marketing. We were very fortunate to find a partner with the same vision and hunger to grow.

Why did you choose Malaysia as your Southeast Asia base? 

We were inspired by China’s vision to redevelop the old Silk Road route through its Belt and Road Initiative, which covers Southeast Asia. In looking for a regional headquarters in Southeast Asia, the top thing we look for is the language. Second is a culture that is heavily dependent on the Chinese way of doing business. Third is local government. And when we go out, we need to depend on a network of friends. All these considered, it was either Singapore or Malaysia. But Singapore is too mature and competitive to enter two years ago, so we chose Malaysia in the end.

How will this partnership enhance hpa’s footprint in Southeast Asia?

Our goal is not just Malaysia, but 10 countries in Southeast Asia. We want to grow in six countries in Southeast Asia within this year.

Since merging just four months ago, we have one project each in Singapore and Myanmar. We’re aiming to enter full-fledged in six countries this year, so apart from Malaysia, Singapore and Myanmar, we are thinking of Jakarta next, Bangkok and Ho Chi Minh City.

What about business prospects in the Chinese mainland?

The mainland market took a dive two years ago. Demand is still high in first-tier cities, but the problem is with second-, third-, and fourth-tier cities, where the market is over-supplied. Even if housing prices have not fallen much, transaction volumes have dropped. This has had a domino effect on developers and companies like ours, where 60 per cent of our business comes from the mainland. Opening this Southeast Asian operation two years ago turned out to be a good move.

What makes Southeast Asia such a promising market?

In Southeast Asia any one country is not big, but Southeast Asia as one big market is very much like China 20 years, when it was a golden opportunity for Hong Kong services because their legal and professional services were not very developed and they needed Hong Kong expertise to upgrade their system.

When we went to China over 30 years ago, when no one wanted to go in, we spent four tough years, but it has been smooth sailing ever since. It opened so many doors and at the time, local competition was very low. We feel like Southeast Asia is exactly that right now.

How does being in Southeast Asia contribute to the overall goal of hpa? 

We are still very much a Hong Kong company. Our goal is to bring Southeast Asia and Hong Kong together. Hong Kong companies going to Southeast Asia and merging with local partners represent the best of both worlds because you tap into the regional resources. When we go abroad, we bring in our Hong Kong clients, China clients and investors. What they offer on the other hand is land, investment opportunity and local demand. So it’s a symbiotic relationship.

We are trying to capture the essence of the Belt and Road Initiative by doing not just architecture, but also investment advisory, which means deal-sourcing and deal-matching for our mainland, Hong Kong and Southeast Asia clients to connect both sides.

In the past, a one-stop shop only included architecture, engineering, and maybe other consulting services. But no one, to our knowledge, has attempted to offer such a range of services because they’re very different disciplines. We think it will work because the Southeast Asian market is not transparent. We’re able to create, from ground zero to completion, a full-spectrum service. We not only appeal to the local developers because of our one-stop service but also to global investors.

What is your advice for Hong Kong companies considering Southeast Asia?

For companies that depend heavily on China, it’s too dangerous to put all your eggs in one basket. China long-term will be fantastic, no question. But at the moment, it’s undergoing a calibration, which is why we must diversify.

For Hong Kong companies, we want to go to places where we have the most friends, cultural similarities and good deals. So I think Southeast Asia is definitely a good market for Hong Kong companies because we have the upper hand and they’re receptive to our ideas and gives us room to grow.

Indonesia for us is a prime target. We are very keen to open Jakarta because the country has more than 250 million people, accounting for half of Southeast Asia’s population. Jakarta is now tough to get in because the property market is just starting to grow and infrastructure is still undergoing development, so people are still not attuned to the idea of property development. It will take time for the market to mature. So we’re looking for the right opportunity. It will be the China of Southeast Asia. Timing is key. We don’t want to jump in too soon, but we don’t want to be too late.