Hongkong Land Welcomes Crypto Firm to Central’s Exchange Square

Hongkong Land, the biggest landlord in Central district, has leased a full floor of Three Exchange Square, a trophy tower that commands some of the city’s highest rents, to crypto assets group HashKey for a reported HK$120 ($15.40) per square foot per month.

HashKey is the first crypto firm to move into the Exchange Square complex, which consists of three Grade A office blocks that have traditionally been home to blue-chip investment banks and white shoe law firms. The three-year-old venture will become a fintech neighbour to the Stock Exchange of Hong Kong, as well as mainstream financial institutions China Merchants Bank, Australia’s ANZ Bank and BNP Paribas.

“At HashKey Group, we are excited to be the first digital assets firm in Exchange Square and look forward to expanding our footprint to Central, the heart of Hong Kong,” said Michel Lee, executive president at HashKey. “Three Exchange Square is one of the most prestigious office buildings in Hong Kong and we are glad to be moving to the centre of the business community.”

Hongkong Land, which was founded in 1889, sees its newest tenant as part of an evolution of the city’s commercial landscape, while market figures show falling rents making offices in Exchange Square more affordable for up-and-coming companies.

Next-Door Neighbours

As higher vacancy rates bring down rents in prime locations, companies are seizing opportunities to secure a workspace in the heart of Hong Kong’s chief business district. HashKey’s lease of the 10,150 square foot (943 square metre) 14th floor of Three Exchange Square takes place as vacancy in Hongkong Land’s Central portfolio edged upwards to 6.4 percent as of June from 6.3 percent at the end of last year.

Hongkong Land, which is part of the nearly 200-year-old Jardine Matheson conglomerate, said the latest lease points to an evolution in Central’s office portfolio, with crypto firms now setting up shop next door to major financial institutions.

“Over the years, when hedge funds, quant funds, private equity firms and venture capital funds first came onto the scene, they naturally gravitated towards Hongkong Land’s buildings as being in the centre of the financial community in Hong Kong,” said Neil Anderson, Hongkong Land’s director and head of office for commercial property.

“Digital asset exchanges are just the next chapter in that development within the financial community,” he added.

In June, bitcoin exchange BitMEX was reported by the South China Morning Post to be in talks over expanding its office in Central’s Cheung Kong Centre by half a floor, after paying a record rate of HK$225 ($28.67) per square foot per month for the building’s 45th floor in 2018.

Filling in Space

HashKey’s lease in Exchange Square followed S&P Global’s move back to the Central landmark in April, when the financial information firm took up a two-floor, 22,000 square foot space in the building for a monthly rent of HK$2.2 million, according to Ta Kung Pao newspaper. This was about nine years after it moved from Hongkong Land’s Edinburgh Tower to the International Commerce Centre in Kowloon.

Hongkong Land’s Central portfolio saw a decline in average office rents, from HK$121 per square foot per month in the first half of 2020 to HK$118 per square foot in the six months that ended 30 June 2021.

Vacancy in the group’s Central office portfolio in mid-2021 was more than double the vacancy rate in 2019, which made the recent intake of tenants good news for the group’s portfolio in Hong Kong’s business hub.

But not all tenants in the portfolio have been consistent. In the building that would become home to HashKey, the mainland conglomerate HNA had signed a lease to occupy eight floors for the nine years beginning in 2018. At the time the agreement was made, the vacancy level for Hongkong Land’s Central portfolio was still at 1.4 percent.

The eight floors leased by HNA remained unoccupied until 2019, when a unit of Hongkong Land sued HNA for defaulting on payments, after backing out of a lease for 88,000 square feet of space at Three Exchange Square.

Central Shift

Central, the world’s most expensive office market, is home to the offices of both local and foreign financial institutions. Yet in recent years, tenants have continued to take advantage of lower rents in other districts to relocate.

In April, the Swiss private bank Julius Baer announced that it would not renew office leases in Central’s One International Finance Centre and Exchange Square once they expire in 2023, and instead would be relocating to Taikoo Place in Quarry Bay.