Shimao Opens 76th-Floor Flexible Office Outlet in Hong Kong’s The Center

Just under four years after its chairman joined a consortium that purchased one of Hong Kong’s tallest office buildings for $5.2 billion, Shimao Holdings has opened a floor in The Center as a serviced office space, according to local news reports.

The HKEX-listed developer’s unveiling of what it calls The Center Space on the 76th floor of Hong Kong’s fifth-tallest tower comes despite declining office occupancy and sliding rents citywide. In June, Hong Kong’s average Grade A office vacancy reached 9.5 percent, the second-highest level since April 2004, according to JLL.

In late 2017, Shimao property chairman Hui Wing Mau had teamed up with Kingston Financial boss Pollyanna Chu and a host of local investors, including “King of Cassettes” David Chan, to purchase 75 percent of the tower from Li Ka-shing’s CK Asset Holdings. The investors divided the property for future resale, with Hui having reportedly selected a single high floor for himself.

Tinnie Choi, head of sales and operation at The Center Space, told local online media outlet HK01 that while “many shared offices in the market are facing closure due to insufficient occupancy rates”, the group’s operations are “relatively stable”. But the Shimao representative did not disclose occupancy rates for the flexible office location.

Launch Into a Soft Market

Shimao’s launch of what could be Hong Kong’s loftiest co-working space follows a slump in the city’s office market, with Central vacancy creeping up to 7.4 percent in June from 7.2 percent in May, JLL said in its Property Market Monitor.

Choi revealed, however, that firms moving out of Central offices have signed leasing contracts with The Center Space as companies begin to adopt hybrid workplace models.

With a total floor area of 23,600 square feet (2,192 square metres), the office offers 120 square feet of workspace per person, three times more than the industry average, The Standard reported.

Aside from the shared office, services at The Center Space include private offices, multi-function rooms for events and meetings, and virtual offices for businesses to operate from Hong Kong’s prime commercial district at a lower cost than physical office rents.

Monthly rents range from HK$8,000 to HK$12,000 ($1,027 to $1,541) for the high-end co-working space, and from HK$580 to HK$1,200 for virtual offices.

Changing Hands at The Center

At a price of HK$33,000 ($4,239) per square foot, the consortium jointly purchased CK Asset’s portion of The Center for a total of HK$40.2 billion ($5.15 billion) in 2017, when Hong Kong’s office market was at its peak.

Since making The Center Hong Kong’s most expensive building ever purchased, Hui and his fellow consortium members have struggled to follow through on a plan to sell off their individual floors and rooms at a profit.

The consortium, which also included Wing Li Group founder Lo Man-tuen, had paid an average HK$33,000 ($4,239) per square foot for the Queen’s Road tower when Hong Kong’s office market was at its pre-protest, pre-pandemic peak.

At the time, Hui, Chu and their confederates had just seen the top floor of The Center sell for HK$55,854 per square foot in September 2017.

But with a mainland clampdown on outbound cash flows having stifled the market in 2018, the speculators were only able to flip 30 percent of the 1.6 million square foot space in the year that followed.

Last August, former recording tape maker Chan sold his 70 percent stake in the building’s 42nd floor for the equivalent of HK$27,100 per square foot, or a 35 percent discount from what he had achieved with his 2019 sale of the 38th floor.

In October, Chan went on to sell the 48th floor of the tower to mainland developer Hopson Development Holdings for just under HK$38,140 per square foot.