Law Firm Flees Hong Kong’s The Center for Wanchai as Office Rents Keep Climbing

Offshore incorporation specialists Maples and Calder, are giving up the 53rd floor of The Center on Hong Kong’s Queen’s Road, as yet another international company flees the world-leading rents of Hong Kong’s Central district.

The law firm’s new home will be a 25,000 square foot space in Wanchai’s Central Plaza, a grade A office building near the waterfront on Harbour Road, according to an account in the Hong Kong Economic Times.

The deal comes among a rising migration of international firms away from Hong Kong’s traditional business hub, where grade A office rents rose nine percent year on year in the second quarter of 2018, reaching an average of HK$136.2 per square foot per month in the Greater Central and Admiralty area, according to figures from consultancy Colliers International.

Move Three Metro Stations Away – Save 50%

Prices for space in the core of Central range even higher, with some agencies noting an average of HK$161.2 per square foot per month. Office rents in Maples and Calder’s new Wanchai home average around HK$80 per square metre in per month, according to listings on local real estate websites. The difference in rent translates into a savings of more than HK$2 million per month for the law firm’s new home in the 78-storey tower.

An extra spur toward relocation could come from last year’s record-breaking HK$40.2 billion sale of the Center to a local investor consortium which now seems keen to sell off the building floor by floor, or at least to generate higher rental returns from their new prize.

Already in April of this year media accounts revealed that blue chip investment bank Goldman Sachs would be giving up five floors in the Center to relocate part of its team to newer and more affordable digs in Hysan’s newly completed Lee Garden Three in Causeway Bay.

The $900 billion investment bank is estimated to be saving more than 30 percent on rent in its new home four MTR stations away from Central, compared to current rents in the Center. Local investor Pollyanna Chu, who was one of the major investors in the acquisition of the Center, welcomed the bank’s decision to depart, as it would open up space for new tenants willing to outbid the New York firm for a prestige address.

The Center Does Not Hold

Maples and Calder’s relocation to Wanchai follows a trend of international firms looking for new homes in Hong Kong, after Central long enjoyed a near-monopoly on multinational tenants. The relocation rethink has seen up and coming new commercial centres such as Kwun Tong in the Kowloon East and Quarry Bay on the eastern side of Hong Kong Island, gain favour with occupiers.

US law firm Reed Smith also recently decided to relocate from its home in Central’s Alexandra House for a 40,000 square foot office in Swire Properties’ Taikoo Place development in Quarry Bay, where rents currently average HK$60 per square foot per month.

Minter Ellison, an Australian professional services firm, also decided to move eastward on Hong Kong island this year, opting to move out of One Pacific Place in Admiralty to a 21,818 square feet office in Wu Chung House in Wanchai, where it is estimated to save up to 67 percent on rent.

According to Thomas Lam, senior director and head of valuation and advisory at Knight Frank, “the Grade-A office rental in Central is the highest over the world. Only multinational corporations and financial institutions can afford such rental level. Other companies will relocate to other locations.”

However, even some of the most prestigious money managers are finding Central’s prices too high.

Two years ago, Citibank moved its Hong Kong headquarters to Citi Tower, One Bay East at 83 Hoi Bun Road in Kwun Tong. The US financial giant’s relocation plan was followed by Singapore’s biggest bank DBS leasing the 5th and 10th floors in the 20-storey Two Harbour Square this April and HSBC leasing two floors totaling around 7,000 square feet in Mapletree Bay Point in Kowloon East.