Hewlett-Packard in timely move to Causeway Bay
IN a bid to escape the higher rents being charged by the Lippo Centre in Central, technology giant Hewlett-Packard (HP) has become the latest major tenant to move to the Shell Tower in Causeway Bay's Times Square.
It has just signed a deal on five complete floors - a total of 100,000 square feet.
Apart from lowering its rent bill, Hewlett-Packard said it was attracted to Times Square by the high quality of the building, the large floor area, and the convenience for their staff, in terms of local amenities such as shopping, restaurants and entertainment facilities.
The HP deal raises the occupancy of Shell Tower, one of the two towers at Times Square, to 65 per cent.
Harriman, the leasing arm for developers Wharf, said it would raise rents again, once the building was 75 per cent leased.
HP will be joining Shell, AT & T and Hoescht in the Causeway Bay development, Times Square received its occupation permit last month.
HP's agent Vigers said it had achieved the best terms to date on behalf of their client.
Vigers was able to negotiate an early surrender of HP's existing lease in Lippo Centre.
HP had three and a half years to run on their lease on 86,000 sq ft net in Lippo Centre.
Their departure will free eight floors.
''Lippo Group now wants to split that space between sales and rentals,'' said Vigers director Gareth Williams, adding this had given them the opportunity to gain vacant possession, on which there is a premium in the current market.
HP is set to move out in six months and then Lippo will probably break up the floors and sell them, keeping back some for rent at a high price, said Mr Williams.
Vigers Stewart Jones, who tied up the HP deal, said his company was negotiating with two further tenants for a combined total of 45,000 square feet in the building.
Once these two deals are finalised, Shell Tower will be 76 per cent full, leading to the promised rent hike by Harriman.
The speed with which Shell Tower has filled up has already led Wharf to up the rent $2 per square foot per month in recent weeks.
The increase will lift the rent to more than $30 per sq ft per month.
In some cases it is as high as $34 per sq ft.
Rent-free periods on space of at least one 20,000 sq ft floor is at least three months.
Times Square is let gross, unlike Wan Chai's Central Plaza, for example, which is asking $50 per sq ft net. Property analysts say, therefore, that the actual rental gap when taking gross and net space into account is narrowing.
This is borne out by the fact that Central Plaza is filling as fast as Times Square, despite the much higher rent, analysts said.
Ms Doreen Lee, director and general manager of Wharf's leasing arm Harriman Leasing, said she had been surprised by the speed at which space in Times Square had been taken up.
''Once we have another 10 per cent we will raise the rents again,'' she said yesterday. ''It's going very well even at this high rental.'' As far as Times Square's other tower was concerned, Wharf said it would decide within the next two to three weeks whether it would be marketed for lease or sale.
In the wake of the HP deal and bearing in mind the other 45,000 sq ft about to be signed up, Vigers said it expected Shell Tower to be fully let relatively quickly.
As demand had been so good on Shell Tower, Mr Williams said he thought Wharf should consider leasing the second tower.
''My advice to them would be to forget sales while the leasing market is so strong,'' he said.
''A year ago we were talking about gross over-supply in Causeway Bay, now it is rapidly drying up and we are seeing the resulting pressure on rents,'' he added.
Sales in Lippo Centre, in common with several other buildings in the area, have just seen a tremendous boost, and the 13th floor recently made $8,000 [per sq ft].
''There will be nothing in there now for under $8,500 per sq ft,'' Mr Williams said.