A downturn in visitor arrivals to Hong Kong, along with the city’s world-leading office rents, may be fuelling a trend toward converting hospitality space into co-working centres, as yet another hotel in the centre city looks set for conversion into flexible offices.
An unnamed property group is said to have bid HK$1.4 billion (US$181 million) to purchase en bloc the Kings Hotel on Wanchai’s Jaffe Road, with the transaction reported to be closing soon, according to an account in the Hong Kong Economic Times.
The report indicates that the new buyer intends to convert the 193-room Kings Hotel into a co-working centre, the latest in a string of properties to be refitted as shared offices in the city.
Turning Old Hotels into New-Age Offices
The reported price for the 86,000 square foot (7,990 square metre) hotel works out to around HK$16,200 per square foot, or HK$7.3 million ($929,000) per room in the three-star hotel.
The deal would prove to be the latest windfall for billionaire property investor Tang Shing-bor, known as Hong Kong’s “shop king” for his sprawling retail portfolio. Tang already began cashing in on co-working in July by selling the Wave in Kowloon East’s Kwun Tong area to Bank of China (Hong Kong) Asset Management, after successfully transforming the former industrial workshop into a co-working hub.
Just last month a report emerged that the co-working arm of shared office giant Regus had leased out the 77,000 square foot (7,154 square metre) Sun House building at 90 Connaught Road Central, in Hong Kong to convert the whole building into a co-working centre.
Also in July, Hotel LKF in Hong Kong’s Lan Kwai Fong nightlife district closed its doors for renovation into a co-working centre, with WeWork said to be taking over the nine-story building as its latest location in the city.
Less Tourists, More Co-Working
In the case of the hotel conversions, the co-working seems to have a clear economic explanation. Tourist arrivals in Hong Kong slid by 4.5 percent in 2016, according to government figures, marking the steepest drop in visitor numbers since SARS knocked the city on its back in 2003.
While the tourism downturn is hurting the bottom line for hotel owners, desks at WeWork in Hong Kong are going for as much as HK$7,800 per month, according to the company’s website. The rate for space in the shared office provider’s Causeway Bay location is equivalent to over $999 per month, or about 2 percent more than the $980 per month that the same desk would cost in WeWork’s location on New York’s Broadway.
Currently, Hong Kong houses just over 200 flexible workspaces, versus 330 such centres in New York City and more than 1,100 in London, according to a recent report by independent flexible workspace specialist Instant Group. The gap led to a 16 percent increase in the city’s count of co-working centres in 2016, with the market size nearly doubling over the past two years, according to the report.
According to recent agency research, prime office rents in Hong Kong’s Central district average $269 per square foot per year, the highest in the world.