As strikes and protests continue to grip Hong Kong, banks in the Asian financial hub are still signing leases for new office space, even as rents are predicted to slide in the second half of 2019.
Hong Kong-based Dah Sing Bank has agreed to lease a 76,000 square foot (7,060 square metre) space on Queen’s Road East in Wan Chai for a total of HK$3.42 million ($430,000) per month, according to local media reports.
The reported lease deal would the 72-year-old bank, which has 70 branches in Hong Kong, Macau and mainland China, less than a kilometre inland from its current location on Wan Chai’s Gloucester Road.
Moving Inland Cuts Rent By 50%
Dah Sing Bank, which was established in 1947, will be taking up 76,000 square feet in the Sunlight Tower, also known as the MLC Tower, according to an account in the Hong Kong Economic Times.
The Hong Kong-listed commercial bank is said to be paying the equivalent of HK$45 per square foot per month for its new home in the 40-storey skyscraper at 248 Queen’s Road East — around 50 percent less than the current HK$80 to HK$90 rates at its current home in the Everbright Centre.
The Everbright Centre has been the Hong Kong bank’s home for many years, and was known as the Dah Sing Financial Centre before the mainland’s China Everbright Group purchased the 39-storey grade A office tower in 2016.
Dah Sing’s new home became available when logistics firm Anglo-Eastern Ship Management earlier this year chose to move out of the Sunlight Tower for a new home at the Kingston Financial Centre in Kowloon East.
Hong Kong Office Costs Head South
Dah Sing may have been able to help along its profit margin a bit with a cheaper than expected lease as office costs show signs of softening in recent months, with tariffs now expected to slide for the rest of the year.
Average rents in the Wanchai and Causeway Bay submarket fell two percent during the second quarter to an average of HK$77.4 per square foot per month as of the end of June, according to data provided to Mingtiandi by Cushman & Wakefield.
The real estate consultancy has moderated its 2019 outlook for the office market in light of the combined impact of the on-going US-China trade war and local social unrest. “We are forecasting a drop in rentals by as much as four percent in the Wanchai/Causeway Bay submarket and as much as two percent in the overall market in 2019,” head of research at Cushman & Wakefield Hong Kong told Mingtiandi.
“Wanchai/Causeway Bay, together with Central, is coming under increasing pressure from flagging demand in core areas amidst a continuing decentralization trend by multinational corporations seeking cost savings,” Hatcher added.
Net absorption in the Wanchai-Causeway Bay submarket in the second quarter amounted to less than 90,800 square feet, according to C&W statistics, resulting in availability in the sub-market increasing by one percentage point to 7.3 percent as of the end of June.