Swire Leases Six Floors at Two Taikoo Place to China CITIC Bank

Swire Properties has notched what is reportedly Hong Kong island’s biggest office lease since the dawn of the pandemic, with the local unit of China CITIC Bank agreeing to take up around 15 percent of the developer’s Two Taikoo Place project.

“We are delighted to confirm that CITIC has pre-leased six and half floors at Two Taikoo Place, which amounts to over 150,000 square feet (of lettable area),” Swire director and head of office Don Taylor told Mingtiandi in an email. The lease in the LEED, WELL and BEAM Plus Platinum-rated tower, which is scheduled to open its doors in the third quarter, was first reported in the Hong Kong Economic Times.

The relocation by China CITIC Bank International from Swire’s Devon House — a few doors away in the developer’s Taikoo Place community — follows a trend of corporate occupiers upgrading their premises as Hong Kong’s office market continues to be on life support after years of tough times wrought by social unrest and China’s controversial COVID zero policies.

While Two Taikoo Place received its first major occupier commitment more than one year ago, prior to the decision by CITIC Bank, occupiers had agreed to take up around 25 percent of the tower’s one million square feet of space, according to market analysts who spoke with Mingtiandi.

Tale of Two Taikoos

“Preleasing for Two Taikoo Place is gaining momentum,” Taylor said. “In addition to CITIC, and Julius Baer, which has committed to four floors (approximately 92,000 square feet), we are also in active discussions with several prospective tenants from various sectors.”

Swire’s One Taikoo Place, which was fully committed in 2018, was one of Hong Kong’s biggest office leasing successes of recent years with the developer capitalising on an ongoing restructuring of the city’s commercial eco-system by luring tenants such as Facebook, Baker McKenzie and JLL as multi-national tenants balked at the Central’s then world-leading rents.

Taylor acknowledged that, due to the fifth wave of the pandemic, Hong Kong’s office market has remained soft this year, with a recent report by JLL putting overall vacancy for desk space across the city in April at 9.4 percent — consistent with the level one month earlier.

Rents city-wide were down by 2.2 percent during the first quarter, compared to the same period a year earlier, according to a report by Cushman & Wakefield, with the agency estimating that rents in the Greater Central area have fallen nearly 30 percent from the first three months of 2019 to the same period of this year.

Asking rents for Two Taikoo Place fall in the HK$42 to HK$50 per square foot per month range, said Alex Leung, senior director at CHFT Advisory and Appraisal, with that level coming in below the HK$50 to HK$70 per square foot which the developer was reported to be asking for One Taikoo Place when it was leasing out that one million square foot project four years ago.

Julius Baer’s commitment to Two Taikoo Place was the project’s first leasing win to gain publicity in May of last year putting the project on a significantly slower pace than One Taikoo Place, which was fully leased in around one year, according to Mingtiandi’s tally.

Upgrades in Style

CITIC Bank’s shift to Two Taikoo Place follows a trend of corporate tenants taking advantage of the slide in rents to upgrade their premises, with the Chinese government controlled bank moving out of the 1993-vintage Devon House to occupy top spec office space.

Rents at Devon House currently average HK$30 per square foot, according to Leung, with the analyst noting that average grade A office rents in Hong Kong Island East, a commercial district dominated by Swire’s Taikoo Place projects, have dropped 22 percent since the first quarter of 2019.

The slide in leasing rates has also had an impact in Hong Kong’s traditional commercial core, with Hongkong Land, developer of Exchange Square and Jardine House, in its 2021 annual report having noted a 2.5 percent year-on-year decline in average rents in its Hong Kong office portfolio to HK$117 per square foot per month.

With rents moderating, just last week US law firm Dorsey & Whitney was reported to have taken up a 3,500 square foot office in Hongkong Land’s Alexandra House in Central, relocating from its home for more than two decades in Swire’s Pacific Place in Admiralty.

Aside from Dorsey & Whitney’s move to Central, US law firm White & Case recently took up three floors at Hongkong Land’s York House on 15 Queen’s Road where it opened its doors in April.