While Hong Kong’s investment market has slowed down in the past two months, excitement over the opening of the Hong Kong-Zhuhai-Macau bridge is helping to give the city’s office rental market a boost, especially in the emerging Kowloon East commercial district.
During the past week new Swiss duty free retailer Dufry and Japan’s Sumitomo Mitsui Banking Corporation (SMBC) were both revealed as taking new office leases in the eastern part of Kowloon City where residents will soon be able to depart on road trips via the world’s longest steel bridge–tunnel system. The high speed rail system linking Hong Kong with the mainland formally opened last month.
The pair of Hung Hom leases follow a string of leases by major international firms further east in Kowloon as corporate tenants increasingly look beyond Hong Kong’s traditional commercial hub in Central district.
Japanese, Swiss Companies Take Nearly 31,000 Square Feet in Hung Hom
Dufry, a Zurich-based operator of duty-free retail outlets is taking 12,850 square feet (1,200 square metres) in the China Life Insurance Centre, part of the One Harbourgate complex developed by Wheelock, according to an account in the Hong Kong Economic Times, citing market sources.
The Swiss retail is leasing an entire lower floor in the complex for a reported HK$36 per square foot per month. Dufry reportedly had previously been leasing space near the Hong Kong airport.
China Life acquired the 15-storey building in Kowloon from Wheelock for HK$5.86 billion in late 2015.
Less than one kilometre inland from Dufry’s new offices along the Hung Hom promenade, SMBC has followed the finance migration to Kowloon renting an 18,000 square foot floor in the Fortune Metropolis office tower next to the Hung Hom MTR station.
The Japanese bank is also reported to be paying HK$35 per square foot per month for its new base across Victoria Harbour. The Fortune Metropolis tower, in addition to connecting to Hung Hom MTR, also sits next to the Hung Hom bus terminus.
Japan’s second-largest bank also has offices in IFC One in Central, as well as in Admiralty district. With office space in the IFC renting for as much as HK$200 per square foot per month according to local agency data, SMBC could be saving over 80 percent on its rent bill by expanding in Kowloon compared to taking more space in Central’s IFC.
Kowloon Attracts More International Tenants
Once seen as an office frontier where only the brave dared to base their businesses, Kowloon East is rapidly gaining momentum with international companies as mainland corporates continue to drive rising office rents in Central and other traditional businesses locations in Hong Kong.
Just three weeks ago US insurer Cigna reportedly signed up for 35,000 square feet of office space in the Mapletree Bay Point project in Kowloon East’s Kwun Tong area. The same Singaporean-invested building scored another victory last week when flexible office pioneer WeWork opened a 60,000-square-foot co-working space in the recently opened office block.
In April this year Singapore’s biggest bank, DBS, signed one of Hong Kong’s biggest office leases of the year when it opted to move many of its team members out of the Center on Central’s Queen’s Road into a new 162,000 square foot home into Two Harbour Square in Kwun Tong.
Office rents in Hong Kong’s Central district averaged HK$137 per square foot in the second quarter, according to Cushman & Wakefield, making the harbourfront location the most expensive place in the world to rent an office and driving new interest in alternative commercial locations.