Hongkong Land on Thursday announced that international auction house Sotheby’s has agreed to lease 24,000 square feet (2,229.6 square metres) of space at Landmark Chater, the three-storey retail podium of Central’s Chater House, with analyst sources who spoke with Mingtiandi calling the transaction the district’s largest of the year by area.
“We are excited to be welcoming Sotheby’s to our portfolio,” said Hongkong Land chief executive Robert Wong in a press release. “We have been promoting art and culture throughout our portfolio for several decades and this strategic move by Sotheby’s underscores our Central portfolio’s reputation as the premier lifestyle and luxury destination right in the heart of Central.”
“Sotheby’s will be the first Hong Kong auction house to move its galleries from office level into a retail space,” said the developer in its announcement. “(It) will be occupying the ground and first floors of Chater House, an interconnected space which will feature an expansive state-of-the-art exhibition space and showcase Sotheby’s full suite of offerings for an all-encompassing experience,” said Nathan Drahi, managing director for Asia at Sotheby’s.
The move represents an expansion into Central for Sotheby’s, which has signed a “long-term lease” at Landmark Chater beginning from the fourth quarter of 2023, according to Hongkong Land, which declined to provide further details on the deal.
Taking It to the Streets
“Our vision is to open a maison in the very heart of the city, at a street level with multiple access points so that it would enable greater access to the public all-year round,” Sotheby’s Drahi said. “Landmark Chater will enable us to provide continuous client engagement cadenced by a sale calendar spread across the year, with live auctions hosted within the same compound.”
The company said it plans to use the space for auctions, private sales and exhibitions, as well as making art and collectibles available for sale via its Buy Now fixed-price platform. The new location will also include a cafe.
At the same time that it is opening up in Hong Kong’s traditional commercial hub, Sotheby’s is also expanding its current presence in Swire Properties’ Pacific Place complex in Admiralty.
“As part of Sotheby’s growth strategy, our Asia headquarters will remain within Swire’s Pacific Place portfolio but move to a larger 36,000 square foot, brand new office space to be completed in 2024,” said Drahi. “The new Sotheby’s Hong Kong headquarters will spread across four floors and be a stone’s throw away from Sotheby’s new maison in Central,” he added.
The company’s new office location will be in Swire’s Six Pacific, place in Wanchai. The developer had announced last week that its office complex under development at 46-56 Queen’s Road East in Wanchai, which is currently in the pre-leasing stage, had been rebranded as Six Pacific Place, with Sotheby’s currently maintaining a space in One Pacific Place.
Rents Down, Occupancy Up
Hongkong Land’s Landmark Chater is part of the developer’s Landmark retail portfolio, which recorded physical and committed vacancy of just 1.4 percent as at 30 September, according to Hongkong Land’s third quarter results.
Although the developer did not mention leasing rates for the retail portfolio during the period, Hongkong Land said in a July release that monthly rents in its Landmark averaged HK$168 per square foot per month in the first half of 2022, which was down sharply from HK$180 and HK$190 in the first and second halves of 2021 respectively.
Overall vacancy for high-street shops in Hong Kong’s core districts, which include Central, Causeway Bay, Tsim Sha Tsui and Mong Kok, fell 1.8 percentage points quarter-on-quarter to 14.4 percent in the third quarter amid an uptick in leasing sentiment, said Dane Moodie, an executive director with CBRE in the city, which was the sole agent in Sotheby’s latest leasing deal. Vacancy in the segment was only 6.6 percent at the end of 2019, he said.
As for Hongkong Land’s Central office portfolio, physical vacancy fell to 5.1 percent at 30 September, which was down 0.3 percentage points from end-June, according to third quarter results posted by the developer.
While Hongkong Land did not provide updated figures on leasing rates for its Central office space in the district during the most recent quarter, monthly rents for portfolio averaged around HK$112 per square foot in the first half of the year, which down about 5 percent from pre-pandemic levels in 2019.
Signs of Life in Central
“While we’ve seen businesses taking a cautious approach and having decided to downsize their offices, (Sotheby’s expansion) shows signs that businesses are confident about Hong Kong’s outlook,” said CBRE’s Moodie.
Sotheby’s expansion into Central was announced about a year after Hong Kong developer Henderson Land secured Christie’s as its first tenant at The Henderson, with the British auction house set to move into 50,000 square feet in the building when it opens in 2024.
In July this year, Henderson secured a second tenant at that 36-storey office building, with US private equity giant Carlyle Group having agreed to lease about 20,000 square feet of space in a move to consolidate its Asia Pacific headquarters.
Hongkong Land has also kept busy bringing tenants into its Central portfolio over the past few months, with US asset manager Invesco having signed a lease for 33,000 square feet of space in Jardine House in October.
The developer, which is 52 percent owned by conglomerate Jardine Matheson Group, saw profit attributable to shareholders jump to $292 million in the first half, which reversed a year-earlier loss of $865 million.