US asset manager Invesco is shifting its Asia Pacific headquarters to Hongkong Land’s Jardine House and UBS will take an anchor space in Sun Hung Kai Properties’ West Kowloon rail terminal project as global financial giants align their corporate homes with falling rents and rising vacancy in the world’s most expensive office market.
Hongkong Land announced Monday that Invesco has signed a lease for 33,000 square feet in the 52-storey tower characterized by its silver aluminum cladding and round windows overlooking Victoria Harbour from 1 November .
“We believe that Invesco was attracted to our portfolio due to our sustainability credentials, the advantages of the unique Hongkong Land ecosystem and the partnership we offer as a landlord, for example in helping the firm achieve future sustainability goals together and offering on and offline services and amenities that assist with staff attraction and retention,” Neil Anderson, director and head of office for commercial property at Hongkong Land, told Mingtiandi.
Invesco’s lease, which was signed earlier this year, brings it from the fringe of Central where it borders Admiralty to more than two floors in a building overlooking Hong Kong’s Star Ferry, after rental rates in the world’s most expensive office market have slid around a third from their 2019 peak, according to agency data.
On the Waterfront
“With Hong Kong as the heart of our regional operations, it’s rare to have this unique opportunity to move into one of the most iconic buildings in Central,” said Terry Pan, CEO for Greater China, Southeast Asia and Korea at Invesco. “We look forward to partnering with Hongkong Land in implementing and operating a sustainable interior fitout that meets the highest ESG standards,” he added.
Invesco has signed “a long-term lease” with Hongkong Land, Anderson added, without disclosing further details, while sources familiar with the commitment said that Invesco saw the lease as improving the work experience for its staff
“In recent years we have observed a flight to quality among financial services and other firms to core Central where corporate leaders are focusing on premium quality and strategically located offices to support business development. The district remains home to the city’s largest population of senior financial executives and dealmakers,” said Hongkong Land’s Anderson.
Hongkong Land, which is 52 percent owned by conglomerate Jardine Matheson Group, owns the largest number of buildings in Central with about under its portfolio. Jardine House is one of the most recognisable buildings in HongKong Land’s 4.8 million square foot (450,000 square metre) Central office portfolio, making it the largest landlord in the traditional business district.
Impacts from the pandemic and slowing economic growth has pushed down Grade A office rents in the region over 30 percent from their peaks in the second quarter of 2019, with vacancy now standing at 8.3 percent or 1.3 million square feet, according to Savills’ research.
Hongkong Land’s Central office portfolio appears to be more resilient, with physical vacancy at 5.4 percent at the end of June, according to interim results released by the developer. Average rents for the porfolio were HK$112 per square foot in the first half, down about 5 percent from pre-pandemic levels in 2019.
“In a falling market Central’s premium over other business districts tends to decline making the area more attractive to firms who may want to re-centralise,” Simon Smith, Regional Head of Research & Consultancy Asia Pacific at Savills, told Mingtiandi.
The move to Jardine House marks Invesco’s return to Hongkong Land’s Central portfolio. From 1998 to 2005, the asset manager occupied two floors in Hongkong Land’s Three Exchange Square, before moving to Champion Tower, where it occupied a space comparable in size to its new home in Jardine House.
Rents in Champion Tower currently average around HK$88.20 (US$11.2) per square foot per month, while analysts estimate that Invesco paid around HK$100 per square foot for its space in Jardine House, based on earlier transactions in the building.
Finding itself with increased choices in the market, Invesco looked for a new office when its previous lease was about to expire, and decided to choose Central over other more affordable options such as Kowloon East due to the convenience of doing business from the district, a source familiar with the matter told Mingtiandi. “The connectivity of locating in Central is truly unparalleled on a global basis,” the source said.
UBS Opts for West Kowloon
While Invesco moves its office within Central, UBS has agreed to lease a space across Victoria Harbour in a tower being built by Sun Hung Kai Properties atop the West Kowloon station.
In a move to consolidate its Hong Kong operations, in 2026 the Swiss bank plans to move to the top nine floors of the tallest tower of SHKP’s joint venture with Ping An Group, taking up a total floor area of approximately 250,000 square feet, the developer announced on Monday.
“We are proud to have UBS as our first anchor tenant of this unique project. Not only is their long-term commitment a ringing endorsement of West Kowloon as an integral part of the city’s central business district, it is also a clear vote of confidence in Hong Kong as a key international financial centre when the global economy is facing multiple challenges.” said Raymond Kwok, Sun Hung Kai Properties Chairman and Managing Director, in a statement.
“We are excited to be moving to the workplace of the future with state-of-the-art infrastructure that brings together and empowers all of our UBS colleagues in Hong Kong under one roof. The office will be built for our purpose and we believe it will improve productivity, collaboration and wellbeing for our colleagues,” said Amy Lo, Chief Executive of UBS Hong Kong, in a statement.
Sun Hung Kai’s HK$70 billion mega-project is planned to be completed by 2025. The blue-chip developer says that the Zaha Hadid Architects project, which is set to obtain six major green and WELL building certifications, will be one of the most sustainable and environmentally-friendly buildings in the world upon completion.
A design approved by Hong Kong’s Town Planning Board last August shows the developer would build two towers of 122 and 148 metres (400 and 486 feet) on the 643,000 square foot (59,735 square metre) site above the high-speed rail terminus.
UBS currently has four offices in Hong Kong, with one located in Central, two situated in Sheung Wan, and one located in Tsim Sha Tsui, according to its website.
“I think everyone is taking a close look at budgets right now and as one of Asia’s most expensive real estate markets it is only natural that CFOs are looking at their accommodation strategies in Hong Kong,” said Savills’ Smith.
He added that, in this market where Grade A rents are down by around 30 percent [from their previous peak in 2019], there are plenty of opportunities to cut overheads but also to occupy greener buildings with better amenities, attributes which help to attract and retain talent in today’s very tight labour market,”
Hong Kong’s Grade A office market remained generally quiet in the third quarter amid global economic instability and ongoing Covid restrictions, with overall vacancy now at 10.2 percent and vacancy in some districts close to or above global financial crisis levels from 2009, according to Savills’ analysis.
The firm expects demand to remain lacklustre over the final quarter of the year and that vacancy will continue to tick upward into 2023 as new supply is added to the market.