US presence in Hong Kong took another hit earlier this month when the American Chamber of Commerce in the city sold its offices in Central at a discount.
AmCham Hong Kong sold its 5,968 square foot (554 square metre) office in the Bank of America Tower on Harcourt Road for HK$145 million ($18.7 million), according to sources familiar with the transaction who spoke with Mingtiandi. The organisation set up to promote American business has cut its staff by more than half over the last three years, according to recent reports.
“Our aim is to invest our resources and time in order to build a solid future of the American Chamber of Commerce in Hong Kong. This means making solid financial decisions about how to use our space and money,” AmCham chairman Robert Grieves said in a statement.
The asset was sold at 20 percent below the asking price that AmCham had reportedly set when it put the office on the market in June, and shaved 12 percent off of the value of the most recent transaction in the 38-storey building in Hong Kong’s financial district.
The sale comes on the heels of the US government’s HK$2.56 billion disposal of a set of official residences on Hong Kong’s Shouson Hill as the financial hub increasingly becomes a sparring ring between the US and China.
AmCham Goes Small in Hong Kong
“AmCham will eventually seek a new modern office space that is digitally friendly and comfortable for both our members and visitors,” Grieves added, while expressing confidence in the chamber’s future in Hong Kong.
At the reported price AmCham’s sale of its 19th floor space was at a value of around HK$24,296 per square foot. The most recent previous transaction in the Bank of America Tower was a lower floor unit which sold for HK$27,000 per square foot in July. Before that an upper zone unit had sold for HK$28,000 per square foot in February.
With AmCham’s sale this month, prices in the 42-year-old tower have now fallen by more than half since their peak in September 2018, when a unit sold for HK$53,760 per square foot, according to Midland IC&I data.
A report in the Standard indicated that the AmCham, which will continue to occupy its current home through mid-2021, has already agreed to lease a smaller space near its current location.
The non-profit had purchased its home in the Bank of America Tower in 1996 for HK$54.6 million and completed a pricey renovation in 2018.
Central Strata Sales Slide
The Chamber’s move comes as the strata office market in Hong Kong’s Central district continues to flounder in the wake of protests, the COVID-19 pandemic, ongoing tension between the US and China, and the new National Security Law.
In its third quarter report on Hong Kong’s investment market, Savills indicated that strata title commercial sales sentiment was muted, thanks largely to a third COVID wave gripping the city in late summer and delaying economic recovery.
The property downturn, which has now extended since early 2019, has led some vendors to accept lower selling prices, leading to an increase in deals last quarter, with 261 investment transactions recorded in July and August — up from 237 during the entire second quarter. During the third quarter, prices office assets in Central offices fell 5.1 percent from their second quarter levels, and were down by 13.8 percent from the same period in 2019.
Prices in Central’s strata title office market have been falling since reaching a peak of HK$76,260 per square foot in October 2018. By the same month of last year, average asset values had fallen to HK$38,484 per square foot, with that number declining further to an average of HK$32,540 per square foot in July of this year, according to Hong Kong’s Rating and Valuation Department.
AmCham Cash Crunch Leads to Sale
Although AmCham expresses optimism about the future, the organisation has been losing traction in recent years, a trend not helped by Sino-US tensions.
An account in Hong Kong’s Singtao Daily indicated that AmCham currently has just 11 staff members, down from 26 in 2017. Although the chamber continues to have support from Bain Capital, CBRE, and Goldman Sachs Asia as members, overall corporate enrollment has dropped to 1,300 organisations – less than half of the organisation’s 1996 peak membership of 2,800.
An in-house survey in August found roughly 39 percent of AmCham’s membership was considering exiting Hong Kong due to the National Security Law passed in June of this year.
According to financial records reviewed by the SCMP, AmCham has been running at a deficit since 2016, with that shortfall mounting to a HK$2.7 million loss in 2019. AmCham has yet to release last year’s financial statements, which were due in March.
Controversy also erupted in June when three former directors claimed they were fired for protesting, and leaking, Joseph’s salary.