You’ll have to pay 3.5x Manhattan prices for an address at Hong Kong’s Two ifc
Two units on a high floor of Hong Kong’s Two ifc skyscraper have been leased out for HK$200 ($25.63) per square foot per month, setting a post-2008 record high for the world’s most expensive office leasing market.
The units covering a total area of 2,930 square feet (272 square metres) have just been taken up for a total of about HK$590,000 ($75,616) per month, according to an account in the Hong Kong Economic Times. The tenants, believed to be international investment funds, are paying a 23 percent premium over the previous rental rate of HK$163 per square foot for the space in the joint venture project developed by Henderson Land and Sun Hung Kai Properties.
The lofty price tag for the offices in Hong Kong’s second-tallest tower is nearly 2.5 times the average grade A office rent in the city, and 43 percent more than the average rent for prime offices in Central district. Setting a new record after the global financial crisis, the rent for the units is also 25 percent more than the HK$160 per square foot China’s Ping An Bank reportedly agreed to pay to rent an entire floor in the neighboring Exchange Square complex in Central last month.
Prime Office Rents Get Even Loftier
SHK’s Raymond Kwok (L) and Henderson’s Lee Shau-Kee share a profitable Central property
The new milestone at Two ifc, an 88-storey skyscraper along the harbourfront in Central, demonstrates the willingness of finance firms to cough up ever-higher rents for the most prestigious premises in the Asian financial hub’s core business district. This latest lease stands at more than 3.4 times the $7.5 per square foot that Amazon recently agreed to pay for its soon to open office in Midtown Manhattan.
Another benchmark was recently achieved when a 1,028 square foot (96 square metre) unit on a high floor of One Exchange Square was rented out for around HK$185,000 ($23,715) per month. The rent for that compact unit equates to HK$180 ($23.07) per square foot.
Separately, a 1,545 square foot (144 square metre) space in the mid-zone of Hongkong Land’s Prince’s Building in Central also leased out for around HK$200,000 ($25,633), or HK$130 ($16.66) per square foot, according to the local media report.
Low Vacancy Meets Rising Demand
Average monthly rent for grade A offices in Hong Kong stood at HK$80.5 per square foot per month in the third quarter, according to the latest market research report by global brokerage Cushman & Wakefield. In the Greater Central area (including Admiralty to the east and Sheung Wan to the west), that figure was HK$126.6, rising 0.5 percent quarter-on-quarter amid a tight average vacancy rate of 3.9 percent.
“Greater Central rents are likely to climb higher over the near-term against limited availability (with two-thirds of buildings enjoying a vacancy of less than 5%) and healthy PRC leasing enquiries,” the agency notes, forecasting that rents for the submarket will climb by an average of five to eight percent for the full year 2017.
Prime Central offices command the most elevated prices, with average rent reaching HK$139.9 per square foot per month in the third quarter. Ultra-low vacancy rates in the most premium properties could drive rents even further upward in some towers. Two ifc, for example, is said to have only one remaining space available for letting, with an asking rent of HK$210 per square foot.
On paper, it seems the face value base rent may be record setting for HK offce market. But in reality, I wonder what’s the effective net rent will be after factor in rent free period and other incentives to sweeten the deal.
@ Al. HK rental market has a small window to negotiate with the landlord as demand is greater than supply. Rent free periods are normally 2-3 months max to cover the tenant fit out. Gesture maybe generous from surface to tenant but reality is that landlord will make that back during reinstatement and yearly rental adjustment. End result will always favorite the dirty landlords no matter how you slice the cake…