Admiralty Office Floor Sells at Five-Year Low Price in Slow Hong Kong Market

Hong Kong-listed developer Tomson Group is acquiring an office floor in Admiralty for HK$193 million ($25 million), clinching the asset at a unit price of HK$18,161 per square foot which is reportedly the lowest in five years amid muted market activity.

Known for its Tomson Riviera project in Shanghai’s Pudong district, Tomson said in a filing to the local bourse on Sunday that its tender for the 13th floor of the Admiralty Centre Tower II had been accepted, allowing it to pick up the 10,627 square foot (987 square metre) asset from receivers acting on behalf of electronic parts trader Wai Chun Group Holdings.

The floor in the 22-storey building atop the Admiralty MTR interchange had first been put on the market for a price equivalent to HK$29,000 per square foot late last year, before slashing the price for the grade A office asset to HK$20,000 early in 2022, according to a report by local financial daily HKET.

The Admiralty Centre Tower II floor has now found a buyer at 37 percent below its asking price from less than one year ago as average prices for grade A offices in Hong Kong have dropped by 31.1 percent from the market’s peak at the end-2018, according to JLL. Office rents in Central are now 28.3 percent below their market peak in 2019, the agency said.

Prices Fall 49% Since 2019

The office floor sold at a price at the low end of market expectation as investors tend to offer lower bids for properties being sold by receivers and with Admiralty’s office investment market muted for the past year, according to Adrian Tang, head of strata-title office sales in Hong Kong for JLL who was not involved in the deal.

Smaller units in the 1980 vintage tower at 18 Harcourt Road have sold for higher prices this year with an 1,875 square foot office on the 17th floor finding a buyer at HK$25,493 per square foot in May, according to data compiled by Centaline (Commercial)

When compared to prices prior to Hong Kong’s social unrest in 2019 Hong Kong and the start of the coronavirus pandemic in 2020, the price for this latest deal was 49 percent less than the HK$29,924 per square foot fetched for a floor in the same building in April 2017, based on separate data from Prime Property.

Admiralty Action

For Shanghai-based Thomson, which sources most of its profit from development of properties in mainland China and Macau, the strata office is an income-earning investment which could provide a future Hong Kong home for its business.

“It is expected that the acquisition will enhance the property investment portfolio of the group, generate stable recurring rental income and further strengthen the long-term development of the group in Hong Kong,” Tomson said. “The property may be used as the company’s headquarter in Hong Kong at an opportune time.”

The property generated HK$3.9 million in rental income last year, which was down 10 percent from the HK$4.35 million produced in 2020.

Just prior to conclusion of the tender, Wai Chun signed a three-year agreement to lease half of the floor, or 5,313.5 square feet at a monthly rate of HK$238,000, excluding other fees and charges. The agreement, which covers 1 November through 31 October 2025, also includes two car parking space leases for HK$5,000 per month.

Based on the HKEX filing, the strata office floor is currently held by Wai Chun’s lender, Industrial Bank Co Hong Kong Branch, for a December 2018 mortgage, with the trading firm having purchased the office floor in October 2004 for about HK$68 million.

Moving Closer to Future HQ

Tomson, which is currently based in the Wing On Centre tower in Sheung Wan, had announced late last month that it had leased a new office on the 17th floor of the Far East Finance Centre at 16 Harcourt Road, which is just a few steps from Admiralty Centre Tower II.

Its Admiralty acquisition adds to a series of discounted strata office deals in Hong Kong over the past year, including a HK$95 million purchase last month by an executive director of Cheung & Sons of unit at 9 Queen’s Road Central from distressed mainland developer Jiayuan International Group.

Discounted prices and lease rates make Hong Kong’s office market attractive for investors looking to upgrade their workspace, said Paul Yien, JLL’s head of office leasing for the city, who expects the market to rebound during the remaining months of this year with the city’s core business district being a focus of activity.

“We have witnessed a sign of recovery from the downturn in the office market, and believe the positive net absorption will continue to improve in the second half of the year,” Yien said. “Central will be the focus of market activities in the remaining part of the year.”