Hongkong Land has welcomed a former tenant back to its Central office portfolio after 15 years, announcing that global law firm White & Case had taken up three floors at York House, the developer’s Grade A office tower at 15 Queen’s Road.
The US-based firm is leasing 25,000 square feet (2,322 square metres) across floors 9, 10 and 16 at York House, said Hongkong Land’s director and head of office and commercial property Neil Anderson.
“We are delighted to welcome White & Case back to our Central portfolio as they look to expand their footprint across Hong Kong and the APAC region,” Anderson said in a company press release. “The firm’s long term commitment to Hongkong Land is testimony to the quality of the buildings and our leadership in serving the legal services community.”
Though the firm leased its new office at an undisclosed price, the move followed a 2.5 percent year-on-year decline in average rents at the developer’s Hong Kong office portfolio to HK$117 per square foot per month in 2021, according to Hongkong Land’s latest annual report. However, compared with open market rents at Central Tower, which White & Case had previously occupied, rental rates at York House are 30 to 40 percent higher, market sources told Mingtiandi.
Down the Road
With the firm’s new office space having opened in April, the district’s biggest landlord is bringing White & Case back to its portfolio from the 1997-completed Central Tower, which is also on Queen’s Road and less than 200 metres (218 yards) from York House.
The move by White & Case boosted the firm’s office size by about 13 percent from its 22,000 square foot space, according to sources familiar with the matter.
The 14-storey York House, about two minutes’ walk from Central MTR station, spans 116,250 square feet of office space atop Hongkong Land’s The Landmark, a shopping mall home to luxury brands like Gucci and Dior. The building is also part of the Landmark complex, which aside from the retail podium consists of two other office buildings, as well as the Landmark Mandarin Oriental Hotel.
Before settling into Central Tower in 2007, White & Case had occupied 17,000 square feet at Gloucester Tower, one of the office buildings in that same complex.
Central Rents Remain Soft
While White & Case has expanded its office space, many companies in Hong Kong have been downsizing in terms of staff numbers and adopting work-from-home arrangements, said Alex Leung, senior director at surveying firm CHFT Advisory and Appraisal. Landlords will have to offer competitive rents among other incentives to attract new tenants to take up office space, Leung added.
In Central, rents rose 0.7 percent from the preceding three months in the first quarter, JLL said in a report published last month, though despite the slight improvement from January to March, rents in the key business district have come down 1.6 percent year-on-year.
“Market uncertainties since the start of 2022, including the outbreak of Omicron, geopolitical tensions and stock market volatilities, have disrupted the decision-making process of occupiers, (which slowed) office leasing momentum in the first quarter,” said Alex Lam, executive director of office services at Colliers, who added that overall Grade A office rents saw a 1.3 percent quarter-on-quarter drop in the period.
CHFT expects office rents in Central to remain soft in the current quarter, Leung said, noting that most prime office buildings in the district are held under single ownership and the big landlords are unlikely to reduce the rents as much as those of strata-titled offices.
“A few tenants may be able to (take advantage) of lower rents and choose to move to Central from decentralised locations, but more tenants will move out or downsize,” Leung said, adding that vacancy rates will also remain at a high level throughout the rest of the year.
Home City Slows
In 2021, the value of Hongkong Land’s investment properties in its home city was $26.6 billion, down 5 percent from the year before, due to lower open market rents.
However, the lower leasing rates in Hong Kong may have helped the developer attract more tenants, with vacancy in the Central office portfolio improving to 4.9 percent at the end of last year from 5.9 percent at the end of 2020.