A growing number of financial institutions have fled rising office rents in Hong Kong’s Central district this year, and now one of the government bodies charged with regulating the city’s financial markets appears to be following the migration of its charges away from the area’s world-leading office rents.
The Hong Kong Securities and Futures Commission (SFC), which acts as the government’s watchdog of public stock and bond markets, is in talks to lease ten floors of Swire Properties One Island East in Quarry Bay, according to a report in the Hong Kong Economic Times.
The move for the 800-person-plus government unit to the 68-storey tower seven stops east of Central would save the SFC nearly half of its monthly rental bill compared to the average rental rates for its current home in CK Asset’s Cheung Kong Centre on Queen’s Road, where it leases five floors of the prime office building.
Twice the Space at Half the Price
The SFC’s potential lease at One Island East, which has yet to be confirmed by the parties involved, would see the government department taking 200,000 square feet (18,580 square metres) of space in the grade A building, nearly double its current footprint of 100,000 to 110,000 square metres in the Cheung Kong Centre, where it occupies the 30th through the 35th floors. (The building has no 34th floor, but that’s another storey).
Rents in One Island East currently average HK$55 per square foot per month, according to local real estate websites. That rate is roughly one third of the average rental rate of HK$170 per square foot for offices in the Cheung Kong Centre, which also houses Goldman Sachs and Bank of America.
Given the difference in rental rates, should it move to One Island East, the SFC would be paying around HK$11 million per month for its new double-sized home — a savings of more than HK$84 million per year considering the HK$18 million per month it is estimated to currently be paying at the Cheung Kong Centre
One Island East is currently home to Facebook, which will be relocating to Swire’s One Taikoo Place after that tower opens next year, as well as to the Asian division of US retail developer Taubman Centers, Tiffany and Company and Transamerica Insurance.
Should the deal be consummated, the regulator would be stepping into space currently occupied by a pair of international banks, DBS and JP Morgan, both of which have already signed leases for new homes in Sun Hung Kai Properties Two Harbour Square in Kowloon East’s Kwun Tong area
Central Continues to Rearrange Seating Plan
With office rents in Central averaging HK$137 ($17.5) per square foot in the second quarter of this year, banks and other multinationals have continued to look for alternative office locations in Hong Kong.
In September, JLL, announced that it would move its office from Pacific Place, just east of the SFC’s home in the Cheung Kong Centre, to Swire’s One Taikoo Place in Quarry Bay. That relocation decision by the world’s second largest property consultancy by revenue came just five months after global investment bank Goldman Sachs, was reported in April to be giving up its space in the Center on Queen’s Road in Central, in favour of a new location in Hysan’s Lee Garden Three in Causeway Bay.
New Faces Filling Central
Should the SFC flee the Cheung Kong Centre, the 1999-vintage building should have no trouble filling the five-floor vacancy.
For this latest opening, the head of research for Hong Kong at one of the world’s largest property consultancies is confident that CK Asset can find a new tenant to occupy the prime space. “As we’ve seen over the past couple of years, mainland Chinese firms, particularly those in the financial sector, continue to grow their presence in Central and will certainly be one of the biggest occupiers in the area in the future,” said Reed Hatcher, Head of Research at Cushman & Wakefield.
Earlier this year, cryptocurrency exchange BitMEX paid a world-record price of HK$224 per square foot to secure the 45th floor of the office tower, less than ten floors up from the SFC’s current home.
When HNA was forced to abandon its lease of four floors in Exchange Square in September of this year, the complex’s landlord, Hongkong Land, quickly found HNA’s compatriots at China Merchants Bank, ready to occupy the newly-vacant space.