Global banking heavyweights such as JP Morgan and Citibank have been fleeing Hong Kong’s Central district for more affordable locations, but the city’s top social spot for finance executives is staying in the commercial hub, even as it nearly triples in size.
The Hong Kong Bankers Club, which counts 1,000 corporate members from among the city’s elite banks, law firms and financial services providers, has leased a new 20,000 square foot (1,858 square metre) home in Central’s Nexxus Building after 38 years in Hongkong Land’s Gloucester Tower, according to sources familiar with the transaction who spoke with Mingtiandi on condition of anonymity.
The club’s migration is said to be saving it around 58 percent from the price that it might have paid to renew its current lease at market rates, although the new agreement is still costing the 42-year organisation some HK$2 million ($255,000) per month.
Seven Minute Walk Earns 58% Off
The Bankers Club’s new home at 41 Connaught Road — across the highway from 3 Exchange Square — is just seven minutes walk west of its existing location on Pedder Street near Des Voeux Road. However, the organisation will be paying the equivalent of HK$100 per square foot per month for its new lease, compared to current average rates of HK$170 per month at the Gloucester Tower, which is part of Hongkong Land’s Landmark commercial complex.
Representatives of Colliers International, which represented the professional club in its search for a new location saw the site selection as an indication that tenants are still finding the city’s traditional business hub to be a compelling location.
“Despite recent examples of decentralisation, The Hong Kong Bankers Club’s commitment to Central is a strong signal that the district will retain its status as the key financial hub for Hong Kong,” said Colliers senior director David Wood. “The new space at Nexxus Building is centrally located and will be connected to IFC and Exchange Square by a walkway that is due to complete later this year, offering convenience and accessibility for Club members who are predominantly professionals based in Central.”
The Hong Kong Bankers Club’s move came after Hongkong Land, last April decided against renewing the lease when it expires in October next year. The Jardines-controlled developer had said that it intended to “make alternative use” of the premises and let the space to a restaurant to attract more traffic to the Landmark shopping complex, which spreads across several interconnected buildings in Central, according to an earlier report by the South China Morning Post.
Falling Rents Help Bankers Save
In a recent letter to inform its members of the new venue, the club said it had communicated with 12 major landlords and investigated 17 potentially eligible buildings in Central before deciding on the new location which “ideally fulfils both the short and long-term objectives for our Club.” Whatever concerns the club’s elite clientele may have concerning the move up the road may be assuaged by the added playspace provided by their new facility, which at 7,000 square feet is nearly triple the size of the current Bankers Club in Gloucester Tower.
The club is scheduled to move into its new home in the 18-storey grade A office building during the third quarter of 2020.
The bankers may have been able to drive a tougher bargain for their new venue this year, thanks to slowing demand for prime space in Central, according to recent agency reports. In April, corporate occupiers reduced the amount of office space which they were leasing in the business district by 14,500 square feet, compared to March — the sixth straight month of falling leasing levels, according to data from JLL, although the agency still found only a 2.2 percent overall vacancy rate in Central, consistent with its March figure.
In its report on office leasing for the first quarter of 2019, Knight Frank found that average grade A rental rates in Central had dropped 1.6 percent compared to the last three months of 2018.
Nexxus to Connect to IFC This Year
Once known as the Hang Seng Building, the 45-year-old Nexxus was sold to a Morgan Stanley, Gaw Capital and Pamfleet consortium in 2004 for HK$2.26 billion, before the investors repositioned the property and resold it in 2009 for HK$3.6 billion.
Current tenants in the tower include recruitment agency Robert Walters, financial print service provider REF Financial Press and Apax Partners Private Equity Investment.
Founded by overseas bankers in 1977 as the Hong Kong Overseas Bankers Club, the afterwork hangout dropped its reference to non-Chineseness in 1996 just ahead of Hong Kong’s handover to China. Former and current Hong Kong Monetary Authority chief executives Joseph Yam Chi-kwong and Norman Chan Tak-lam, former British governors and chief executive Donald Tsang Yam-kuen and other senior officials have attended events at the club.
A membership to the club is generally part of the compensation package for overseas bankers working in Hong Kong.