Singapore’s biggest bank is following the lead of US competitors Citibank and Goldman Sachs in moving its team out of Hong Kong’s Central district as office rents continue to rise in the core business area. For the Singaporean bank, the relocation plan appears to be as much about cashing in on the city’s market for office assets as it is about saving rent.
In what is reported to be Hong Kong’s biggest grade A leasing deal by area so far in 2018, the Singaporean financial titan is taking up the 5th to 10th floors in Two Harbour Square in Kwun Tong. The new lease paves the way for DBS, which occupies the 10th through 12th floors as well as the 15th through 18th floors of the Center on Queen’s Road, to move out of the building following its sale last year to a group of investors who now plan to sell off the office tower floor by floor.
Unlike its US competitors, however, the move by the Singaporean bank represents an opportunity to take advantage of Hong Kong’s red-hot market for strata-title office floors. The bank currently owns its office premises in the Center where it had originally purchased nine floors in the 73-storey tower.
DBS Consolidates in Kowloon East
DBS is reported to be paying a total of HK$4 million ($509,670) per month for its new 162,000 square foot (15,050 square metre) corporate home in Hong Kong, which works out to approximately HK$25 per square foot per month.
The move to Kowloon East also represents a consolidation for DBS, which will be combining operations currently scattered across Kwun Tong, Hong Kong East and Central into a single location under the new lease. The Singapore bank’s registered head office is still on the 11th floor of The Center in Central, according to the Hong Kong Association of Banks.
Meanwhile, Goldman Sachs is fleeing the Center, after having leased five floors in Hysan’s Lee Garden Three in Causeway Bay at least in part due to the short-term uncertainties around The Center’s ownership and resale plans.
Singaporean Bank Cashes in on Hong Kong Office Market
DBS’ relocation plan puts the bank in a position where it might make more money trading Hong Kong real estate than it does from marketing financial services, as rising levels of demand for offices assets in Hong Kong has driven prices for strata title properties as high as HK$60,000 per square foot.
Earlier this week the 33rd floor of the Far East Finance Centre in Admiralty was reported to have sold for HK$61,000 per square foot setting a new high price for Hong Kong office assets. Last September Tai United sold the 79th floor of The Center for the equivalent of HK$55,854 per square foot, setting a price record for the city at the time.
DBS had already sold off the ninth floor in the Center for HK$954 million last December, and the bank has now reportedly retained brokerage CBRE, which recently added a dedicated strata asset unit to its capital markets team in Hong Kong, to market more of its holdings in the Center.
DBS to Be Sun Hung Kai’s Latest Tenant
Following the DBS deal, Two Harbour Square will now be 80 percent leased after winning over tenants including Arcadis, FTLife Insurance and naked Hub. Completed late last year, The 571,026 square foot Two Harbour Square is the second phase of the Harbour Square project developed by Sun Hung Kai Properties and Wong’s International. The complex is located along the harbourfront promenade of Kwun Tong, and is approximately a 15-minute walk from the Kwun Tong MTR station.
Co-working space operator naked Hub, which was recently acquired by WeWork, leased two floors in the Kwun Tong office building at the beginning of the year. The Shanghai-based co-working startup will occupy the office tower’s top two floors covering a total floor area of 58,000 square feet (5,388 square metres) for a monthly rent of HK$30 per square foot.
SG Bank Joins JP Morgan and Citi in Kowloon East
DBS’ new office in Kwun Tong is just a few blocks away from Citibank’s headquarters in the same district. The US bank moved its Hong Kong headquarters to Citi Tower, One Bay East at 83 Hoi Bun Road in the up and coming business district in 2016. The pair of banks will be joined by another bank next year as JP Morgan plans to relocate its Hong Kong team to a new project being developed in the area by Nan Fung and Link REIT.
A former industrial district, Kwun Tong is an area being promoted by the government as the city’s second central business district after Central.