French bank Societe Generale is reducing its footprint in a Hong Kong commercial tower under the terms of its upcoming lease renewal, joining a parade of foreign finance giants cutting back in the city as mainland firms expand their role in the local economy.
In a statement Societe Generale, which has been leasing seven floors at Swire Properties’ Three Pacific Place, said that it will be trimming its presence in the Admiralty office complex to six levels from seven as part of a five-year renewed lease starting in October.
“We have assessed as early as 2019 different options to the renewal of the lease, factoring in our staff’s increasing expectations to work from home, convenience of the current location, and costs of moving,” a bank representative said. The company added that, under its new office strategy, it will integrate increased usage of remote working, further accelerated by the pandemic crisis, and the ability to refurbish offices to provide a better and more user-friendly experience for our employees.”
With the bank relying on Hong Kong as its regional head office, Societe Generale had moved into Pacific Place in 2006, and is an anchor tenant in the newest section of Swire Properties’ mixed-use project just west of Central.
Brokerages tracking office space in Hong Kong had records indicating that the bank had earlier been leasing as many as eight floors in the office tower. The typical floor plate for each level of Three Pacific Place is 15,000 square feet (1,394 square metres), with an asking price of HK$110 ($14) per square foot a month, according to the South China Morning Post.
Societe Generale’s move, which was first reported in the local press, typifies an emerging trend of international banks going leaner in Asia’s biggest finance hub.
Just in the last two months, Bloomberg reported that Singaporean bank DBS would release two of the eight floors it occupies at Swire’s One Island East tower in Quarry Bay and that the UK’s Standard Chartered would relinquish eight floors it occupies in the Standard Chartered Bank Building in Central and rent out three levels in its Kwun Tong office that it owns.
Earlier this month, Hong Kong news site HK01 reported that German giant Deutsche Bank was surrendering three of the 12 floors it leases at the International Commerce Centre in West Kowloon.
Meanwhile, the little-known Bank of Dongguan from mainland China leased space on the 25th floor of Two International Finance Centre in Central after Japan’s Nomura gave up the offices in 2020.
Office Rents Remain Soft
In its Hong Kong Property Market Monitor report released last week, JLL revealed that Grade A office rents in the city declined for a 21st straight month in February, as the overall vacancy rate remained steady at 9.3 percent.
During February the amount of grade A office space leased in the city fell by 55,100 square feet, with tenants surrendering a record 1.77 million square feet.
Rents fell 0.8 percent in February from a month earlier after dipping 0.6 percent in January, the property consultancy said. Rates in Tsim Sha Tsui dropped 1.7 percent on a month-to-month basis, the most among major office submarkets, while those in Hong Kong East and Kowloon East remained stable.
The average monthly rent was HK$58 per square foot in February, the report said.
Vacancy in the marquee Central submarket was steady at 9.3 percent in March, while Kowloon East (14.3 percent) and Hong Kong East (5.7 percent) continued to see the highest and lowest vacancy rates.
Alex Barnes, head of office leasing advisory at JLL in Hong Kong, identified the remote work phenomenon as a factor tempering demand for traditional office space.
“The COVID-19 pandemic has prompted tenants to reconfigure their workplace and, in some cases, seek flexibility as part of their solution,” Barnes said. “Flexible workspace providers continue to expand in Hong Kong on the back of this and moves from some big-name occupiers seeking solutions for work-from-anywhere staff.”