Property services firm CBRE is set to be the latest global corporation to flee Hong Kong’s Central district, as companies continue to question whether their businesses benefit from being in the world’s most expensive office location, according to a report in the Hong Kong Economic Times this week.
With vacancy rates in Central climbing to 3.8 percent in August – more than double the figure recorded in the same month last year – CBRE has decided to add to the district’s woes by vacating its headquarters at Hongkong Land’s Three Exchange Square.
The property brokerage is reportedly planning to shift from its 30,000 square foot (2,787 square metre) space spread across three floors of the trophy complex at 8 Connaught Place to a new home at Swire Properties’ Pacific Place in Admiralty district.
The relocation exercise is estimated to cut the firm’s office costs by nearly half compared to what it would have needed to pay to renew in its current quarters near Victoria Harbour’s ferry piers.
The Pacific Place deal is one of a pair of new leases signed by the property services provider, which will also be following a trail blazed by many of its biggest office clients by moving part of its team to less expensive digs in Kowloon East.
Property Agency Finds a Way to Cut Rent by Half
CBRE’s brokerage staff will soon occupy a whole floor in Pacific Place, where the company is said to have agreed to pay HK$2 million per month for a 20,000 square foot space in the complex, which features hotels, a shopping mall and apartments in addition to its three office towers.
At the equivalent of HK$100 per square foot per month, the US-based firm’s new home in the 711,000 square foot complex will be 37.5 percent cheaper than current average rents of HK$160 ($20) per square foot per month in the low zone of Three Exchange Square.
In addition to its new home in Admiralty, CBRE is also said to have signed a lease for a mid-level unit in PAG’s International Trade Tower (ITT) — just across the water from Central in Kwun Tong — to accommodate its back-office teams and Kowloon-focused staff.
The Kwun Tong lease in the building formerly known as Mapletree Bay Point means that CBRE will also be giving up its current Kowloon office in Wharf’s Gateway tower.
Providing they worked with a reliable broker, analysts estimate that CBRE is likely to have leased their 13,000 square foot space in the ITT for around HK$35 per square foot per month, or around 78 percent less than current rates at Three Exchange Square. At the estimated rental level, CBRE will be providing PAG with monthly rental income of around HK$455,000 per month for its new Kowloon East accommodations.
Based on the estimated rental payments for the two leases, CBRE is expected to be preparing to pay in the neighbourhood of HK$2.5 million per month in total for the two locations, just over half of the HK$4.8 million that the company would have paid to renew its lease in Central.
Multinationals Migrate from Central in Search of Savings
CBRE’s reported lease deals coincide with tenants withdrawing from a net 62,000 square feet of office space in Central during August according to the most recent figures from JLL, which noted a trend of occupiers based in the commercial hub shifting toward more cost-effective locations in Hong Kong.
Just over two months ago, the Monetary Authority of Singapore relocated from Three Exchange Square to the sixth floor of The Gateway in Tsim Sha Tsui, where it pays HK$65 per square foot per month for 20,000 square feet – a 59 percent reduction on the HK$160 per square foot it would have paid to renew in Three Exchange Square.
In a separate migration of Lion City financial entities into TST, JLL reported last month that the Bank of Singapore had leased 16,000 square feet at Gateway Tower 6 as the unit of OCBC prepares to move from its current location in Central’s One International Finance Centre.
CBRE’s move to Pacific Place was revealed just weeks after the company’s archrivals at JLL left the Admiralty complex for their new home in Quarry Bay. The Chicago-based real estate consultancy had leased 35,000 square feet of Swire Properties’ One Taikoo Place project last year, and moved into the eastern district landmark soon after its completion.