Two IFC leasing fuels price war
MTRC and Sun Hung Kai disagree over rent levels for joint venture
A fierce price competition has emerged between MTR Corp and joint developer Sun Hung Kai Properties (SHKP) over the leasing of Two International Finance Centre in Central.
In the wake of weak demand and a glut of new Grade A office supply, SHKP vice-chairman and managing director Thomas Kwok Ping-kwong yesterday said the company had offered tenants of the 88-storey skyscraper effective rents of $20 per square foot two months ago before pushing them up to $25.
However, property consultants said MTRC had adopted a more aggressive pricing strategy, offering effective rents as low as $12 to $15 per square foot. Effective rents take incentives such as rent-free periods into account.
Piers Brunner, the managing director of property consultants Colliers International, said the price competition between the two owners had not stopped although they talked on a regular basis on rental levels.
'It's a very unusual situation that [potential tenants] could choose between two owners within the same building,' Mr Brunner said.
Under a joint-venture development contract for the project, MTRC owns 18 floors of Two IFC, with a gross floor area of 500,000 square feet in the middle zone.
Excluding the top 14 floors bought by the Hong Kong Monetary Authority in 2001, the remaining portion is shared by a consortium of developers comprising SHKP, Henderson Land Development, Hong Kong and China Gas and Sun Chung Estate.
'It seems that [SHKP and MTRC] wanted to collaborate in the first place, but it turned out MTRC had adopted a more aggressive pricing strategy by offering more incentives, such as longer rent-free period, to potential tenants,' Mr Brunner said.
He said MTRC's strategy could become more aggressive as it actually 'inherited' the office space without paying the building cost.
MTRC property director Thomas Ho Hang-kwong said: 'Whether the price is aggressive or not is in the eyes of the beholder.
'MTRC is a listed company, we have to be responsible to our shareholders and therefore we will not lease offices in Two IFC at an unreasonably low price.'
He had no comment on the $12 to $15 rental level.
Mr Kwok declined to comment on MTRC's pricing strategy but said the lowest effective rent per square foot in Two IFC had increased to $25 recently as 50 per cent of SHKP's space was now committed, with a tenant yesterday agreeing to take up 180,000 sq ft.
