Mainland corporates continue to dominate office leasing activity in Hong Kong’s Central district as China’s Ping An Bank has recently agreed to pay nearly triple Manhattan office leasing rates for a high floor in Exchange Square.
The mainland financial institution in paying HK$160 ($20.65) per square foot per month for its new home in one of Hong Kong’s most exclusive addresses, according to an account this week in the Hong Kong Economic Times, citing sources familiar with the transaction.
The rate for the 12,000 square foot (1,100 square metre) space, is more than double the average asking rental for grade A space in the city, and demonstrates the willingness of mainland corporates willingness to pay top prices for prestige addresses in a market seen as China’s gateway to the world.
The deal means that Ping An Bank is paying nearly triple the $7.5 per square foot per month that Amazon agreed to last month in a 360,000 square foot lease at Brookfield’s new 5 Manhattan West project in New York’s Midtown.
Hong Kong’s World Leading Rents Continue to Rise
Ping An’s new space takes up a whole floor in Exchange Square, a multi-tower complex along the harbourfront in Central. The banking affiliate of Shenzhen-based Ping An Insurance relocated from a similar-sized space in Bank of America tower in Admiralty, reportedly with the goal of upgrading its location.
The bank’s new address in the Hongkong Land-owned project is already home to mainland wealth management company Noah International, and transportation conglomerate HNA leased 93,600 square feet of space in Three Exchange Square earlier this year.
Also during this month, China Industrial Bank is said to have leased floors 10 through 12 of tower one in Central’s IFC complex. The mainland bank is reportedly taking up a total of 60,000 square feet in the complex adjacent to Exchange Square at a rate of around HK$150 per square foot.
During the second quarter, mainland corporates are said to have accounted for 85 percent of the major new leases in Central. Some of the world’s largest real estate consultancies predict that the already world-leading rents in Hong Kong’s Central district will rise by another 5 to ten percent in the second half of 2017, thanks in large part to demand from Chinese corporates such as Ping An.
According to Mingtiandi’s Hong Kong Office Index for the second quarter of 2017, which averages the office rents recorded by the major international property consultancies operating in Hong Kong, the average cost of renting a square foot of grade A space in Central stood at HK$125 per month as of the end of June. City-wide, grade A rental rates stood at HK$72.4 per square foot per month.
Multinationals Keep Heading to Kowloon East
While mainlanders continue to move into Central, international corporates that once dominated the Asian financial hub are finding cheaper space in alternative business district around the city.
Supermarket chain Tesco is said to have recently leased the entire 31st floor of developer Wing Tai’s Landmark East project in Kwun Tong. The UK retail giant is reportedly paying HK$30 per square foot per month for its new space after relocating from Swire’s Taikoo Place in Quarry Bay. According to local press accounts, Tesco moved to its new Hong Kong home to reduce its rental costs.
Kwun Tong in Kowloon East is emerging as a lower priced alternative to Central with a number of international tenants moving to the former industrial area to take advantage of cheaper rents and larger floor plate buildings.
US financial giant Citibank moved 3,000 of its Hong Kong team members to its new 301,500 square foot building in Kwun Tong last year, and according to a recent report by Cushman & Wakefield, developers are rolling out another 1.8 million square feet (167,225 square metres) of new grade A space in the area during the second half of this year.