Over half the space in Swire Properties’ new office tower in its flagship Taikoo Place development has already been leased out, chief executive Guy Bradley announced at the project’s topping out ceremony in Hong Kong’s Quarry Bay today.
Among the tenants already signing up for space in the one million square foot (92,903 square metre) One Taikoo Place are Internet behemoth Facebook and international law firm Baker McKenzie.
The rapid take-up of the 48-storey project on eastern Hong Kong Island has been helped by soaring rents in the city’s traditional business hub of Central, which has driven an exodus of multinational firms to alternative commercial centres.
Going East for Lower Rents
One Taikoo Place, part of the HK$15 billion ($1.9 billion) Taikoo Place redevelopment project, is scheduled for completion in the third quarter of the year after the structure officially reached its maximum height today. Average asking rent in the new tower is around HK$50-70 ($6.4-9) per square foot per month, comparable to that of the developer’s 68-storey office tower One Island East in the area, said Don Taylor, Director of Office at Swire.
Over half of the new skyscraper has been secured by multinational companies, including Baker MacKenzie, which will relocate its entire operations in the city from Central to the Quarry Bay building. The top law firm will take up five floors totalling 100,000 square feet (9,290 square metres). Social media king Facebook will also move to One Taikoo Place from One Island East, expanding to take up 100,000 square feet (9,290 square metres) in the new project.
Widening Rental Gap Lures Tenants
Swire’s latest tower has drawn particularly strong interest from companies looking to relocate from Central, Taylor said — propelled by the area’s tight vacancy, absence of new office supply and strong demand for space, especially from mainland firms. “Rents are increasing. So the gap between Central and One Taikoo Place is widening, which makes it a financially compelling argument to move down here,“ Taylor noted.
The growing cost gap between the traditional downtown business district and Taikoo Place’s location seven metro stops away has also prompted a number of tenants to move to the developer’s new project from Swire’s Pacific Place in Admiralty — just one metro stop east of Central, Taylor said. He added that the vacated space in Pacific Place has been re-let to predominantly mainland companies.
Multinationals Retreat From Central
Central is the world’s priciest office market, with premium rents over 50 percent higher than those in New York’s Midtown and London’s West End, according to property brokerage JLL. Premium office rents in the area stood at US$323 per square foot per year in the fourth quarter of last year.
Mainland-based firms are a major driver of rental growth in Hong Kong’s priciest addresses, accounting for 64.2 percent of new leases in Central office buildings last year, according to JLL.
In October, China’s Ping An Bank paid a reported HK$160 ($20.65) per square foot per month for a 12,000 square foot (1,100 square metre) space in the Exchange Square complex in Central, where HNA Group also occupies over 93,000 square feet of space.
The sky-high rents in Central have prompted many multinational companies to look for alternative locations in Hong Kong, with US-based Citibank moving into a new 301,500 square foot building in Kowloon’s Kwun Tong area in 2016.
The office decentralisation trend is poised to continue, Bradley said. “We are a strong believer it’s here to stay.”