Low rents lure big clients to Kowloon East
Competitive rents and a new business environment in Kowloon East, have ensured a rapid take-up of space in Nan Fung's new office project, Octa Tower in Kowloon Bay, the developer says.
'The take-up of space at Octa Tower has reached about 60 per cent. It will be fully let by the end of the year,' Nan Fung managing director Donald Choi Wun-hing said.
Located in Lam Chak Street on the waterfront in Kowloon Bay, near the former Kai Tak Airport area, Octa Tower is a 30-storey grade-A office building.
Nan Fung gained approval to convert the building into an office tower and paid the land premium for changing the land use when an industrial complex was being built on the site in 2009. The conversion to an office tower with a total gross floor area of about 693,000 square feet was finished at the end of 2010.
Asking monthly rent is about HK$20 per square foot and the building has lured tenants from the IT, finance, and business services sectors such as CSL Advanced, Li & Fung Group's Trinity, and Wing Lung Bank.
Choi said Nan Fung was still on the lookout for more big tenants.
'The floor plate of the building is large. Space on the lower floors is about 35,000 square foot a floor, and on upper floors it is about 23,800 square foot a floor. We are looking for tenants that can take up a whole floor - for example, Li & Fung has leased all the space on the 28th to 30th floors,' Choi said.
Kowloon Bay and Kwun Tong have attracted many tenants seeking to relocate from other business districts over the last two years. The trend is expected to continue with government plans to develop Kowloon East into a core business district and the transformation of the Kai Tak area into a new leisure, commercial and residential area.
'Some of our tenants have moved from traditional business districts because they consider our building offers value for money,' Choi said.
Research by Jones Lang LaSalle, the marketing consultant for Octa Building, shows the net effective rent in Kowloon East was HK$26.9 per square foot at the end of April, the lowest among the main business districts and well below rents of HK$93.1 per square foot in Central and HK$53.1 per square foot in Wan Chai and Causeway Bay. Net effective rent is the rent after allowing rent-free periods, rebates or incentives and in terms of net floor area.
'It is obvious that there is a price differential between Kowloon East and Causeway Bay and Central. That's why the building represents such good value.'
Jones Lang LaSalle chief operating officer Gavin Morgan said the district was an emerging business area with continued rental growth. 'Rents will grow a further 5 to 10 per cent by the end of this year,' he forecast.
Nan Fung is also looking for tenants for the retail space on Octa Tower's ground floor, Tom Gaffney, head of retail for JLL, said targeted tenants included fashion outlets and food and beverage retailers. It also planned to offer space for use as a car showroom.
Choi said Nan Fung may convert part of the office space into a hotel development when the district matured in 10 to 15 years' time.