Swire Properties is expanding its Pacific Place portfolio eastward from Hong Kong’s Admiralty into Wan Chai district, having dubbed a 24-storey office tower on Queen’s Road East as Six Pacific Place earlier this month.
Set to be completed in the fourth quarter of next year, the 218,000 square foot (20,252 square metre) building, which was formerly known as 46-56 Queen’s Road East, is now 23 percent pre-leased, Swire said, and has attracted tenants including international auction house Sotheby’s, which this month announced that it would move into a brand-new 36,000 square foot office spanning four floors at Six Pacific Place.
Swire also said in a recent announcement that it is rebranding an adjacent office tower, known as 28 Hennessy Road, as Five Pacific Place with the two projects set to be connected in their lower storeys. “Renovation work to create a unified podium for the two towers will be completed by summer 2023,” a company representative told Mingtiandi.
“We intend to expand our core portfolio at Pacific Place over the next decade in accordance with our HK$100 billion investment plan,” said Don Taylor, director of office at Swire Properties in the announcement. “This eastward expansion of our Pacific Place portfolio is timely, given Admiralty’s importance in what is likely to become the new core of greater Central, with its enhanced MTR connectivity across districts,” he said.
Rents and Occupancy Down
Six Pacific Place will be “well connected to other parts of the Pacific Place portfolio – including Three Pacific Place and the Pacific Place Mall – as well as the Starstreet Precinct (a retail and residential precinct managed by Swire Properties in Wan Chai) – via a planned extension of the existing Three Pacific Place underground pedestrian link,” Swire said in the press release.
That tunnel will also directly connect the new project to the Admiralty MTR station, the developer added.
As of the third quarter, office rents in One, Two and Three Pacific Place ranged between HK$95 and HK$120 per square foot per month, said the Swire representative, who noted that the developer saw a negative rental reversion rate of 18 percent for leases concluded over the first three quarters of 2022, compared to the market peak three years ago.
Current asking rents across Admiralty district average HK$51.40 per square foot of lettable area per month, according to Ada Fung, executive director and head of office services with the advisory and transaction division at CBRE Hong Kong. Since the last three months of 2018, asking rents for office space in Admiralty have now fallen by 38 percent.
Further east in Wan Chai, asking rents average HK$63 per square foot per month, said Alex Leung, senior director at CHFT Advisory and Appraisal, noting that leasing rates in the district are down around 25 percent decline over the past four years.
As of 30 June, occupancy for Swire’s Pacific Place complex stood at 97 percent, according to its latest interim report, showing a drop of 3 percentage points from the end of 2018, when it was fully let.
Vacancy rates for Grade A offices in Central and Admiralty have risen to about 8 to 9 percent currently, compared to less than 2 percent in the fourth quarter of 2018, said Leung. In Wan Chai and Causeway Bay, vacancy is at around 10 percent, which is up from 2 percent four years ago.
Greater China Focus
Swire Properties, which has been ramping up investments in Hong Kong and in mainland China this year, last week signed a RMB 5.55 billion ($800 million) deal to take full ownership of a Chengdu mall through a buyout of its partner, Sino-Ocean Group’s, interest in the 50:50 joint venture.
That western China transaction came after Swire in October teamed up with state-owned China Tourism Group Duty Free Corporation Limited (CTG Duty Free) to develop a resort-style retail complex in Hainan province. The joint venture in October acquired a site in the resort city through a government land sale for RMB 1.31 billion, with plans to open a shopping destination on the plot.
In Hong Kong, the developer has now sold out the majority of the homes in its Eight Star Street project just one minute’s walk south of Six Pacific Place, at prices ranging up to HK$48.5 million for a 913 square foot top floor unit, according to local property listings.
In June, the company won a fresh residential site at 269 Queen’s Road East in Wan Chai – less than 10 minutes’ walk east of Six Pacific Place – with a bid of HK$1.96 billion at a government auction.
Also in Wan Chai, during late August flexible office giant IWG announced that it had leased all 18 floors in Swire’s 8 Queen’s Road East for a new co-working location, with that tower located just a few doors west of Six Pacific Place.
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