(June 10, 2022)
Market Highlights
A few larger leasing transactions were recorded over the last few weeks. CITIC Bank has signed up a new lease for 130,000 sf of office space at Block 2, one of the redevelopment sites at Taikoo Place in Quarry Bay. It represents a total of six floors with an estimated price tag of about HKD50/sf. This is an office upgrade as CITIC Bank is an existing tenant of Devon House with similar floor space. The Swiss private bankers, Julius Baer Group, has also signed up a lease for 92,000 sf or four floors of the same building at similar price. This does save a few dollars on their rental expense as they were moving from Central.
Coming back to Central, the international law firm White & Case has signed up a lease to move back to The Landmark from the opposite Central Tower, involving a total floor area of 25,000 sf, at an estimated price of HKD90+/sf.
Elsewhere in Kowloon, Panasonic just leased 26,000 sf of office space at Moko Mongkok, right above the Mongkok Station of the Eastern MTR line. Again, this is a relocation from ChinaChem Tower in TST East where they have leased a total of 40,000 sf of office space. In Kwun Tong, the SAR Government just leased 50,000 sf of Landmark East.
Brief comments
While some China based investment banks are downsizing and reducing its floor space, we believe this is just incidental to the market at this point in time. Quite a few commercial and investment banks in Hong Kong already announced their reduction in office space last year as a result of their shifting to “Work from Home” policies permanently until further notice. This kind of reduction is not expected to continue in large scale.
This end of the market sees the silver lining where different segments of the market is recording sizable leasing activities. While the overall commercial market is still considered relatively quiet, it is a good sign to see leasing activity is gradually picking up even though a majority of these activities are just relocation or an upgrade of office space. This may be seen as that the current low rental market is acceptable or the rental is so low that even corporates with their tight budgets can upgrade their office space despite the tough economic environment. It should be noted that rental is not the only consideration when comes to business relocation, we will be surprised by the amount of other costs involved such as renovation, moving cost and equipment upgrade which can easily reach tens of thousands of dollars. If corporates are willing to spend this sort of money in relocations, it seems the commercial market is on its way to recovery too.
