Kowloon East offices attract plenty of tenants
International companies on the island are crossing the harbour to take up cheaper spaces in brand new buildings
Japanese-based Ricoh Corp and Parsons Brinkeroff of New York will relocate their offices from decentralised districts on Hong Kong Island to One Kowloon, a newly completed building in Kowloon East.
Lured by cheaper rents and brand new office space, the two will lease a total area of 180,000 square feet at One Kowloon, developed by Glorious Sun Enterprises, sources said.
The office spaces they will lease are similar in size to their existing premises.
The rent, which they were negotiating, was expected to be close to HK$20 per square foot but was still 14 to 40 per cent lower than what they were paying at their existing offices, agents said.
Ricoh Hong Kong, the local arm of Ricoh Corp, would leave Tai Yau Building in Wan Chai and move to an 80,000 sqft office in One Kowloon, while Parsons Brinkeroff, an international planning and engineering company, was relocating from AIA in North Point to take up 100,000 sqft of office at One Kowloon, sources said.
The deals are expected to be signed before Lunar New Year.
Jones Lang LaSalle, the marketing agent for the project, refused to comment on the leasing.
One Kowloon provides a total floor area of about 700,000 sqft, including 30,000 sqft of retail space. It also has about 250 parking spaces.
The occupation permit was granted last month.
Jones Lang LaSalle had earlier said that more than 13 floors of office space had been taken by the end of last year.
One Kowloon has attracted many office tenants who have long resided on the Island side. More than 50 per cent of the tenants in One Kowloon were from Hong Kong Island, Fiona Ngan, the head of markets at Jones Lang LaSalle, said earlier.
In its latest research report, Jones Lang LaSalle said competitive rentals and the completion of new supply contributed to a relative increase in demand for grade A offices in Kowloon East in the fourth quarter.
Demand came mostly from cost-sensitive tenants moving or establishing secondary offices. With the rental gap between grade A offices and non-grade A/industrial office buildings in Kowloon East narrowing over the past few months, upgrading demand had become more apparent, the report said.
For instance, Bausch & Lomb and Maersk have moved to One Kowloon from offices on Hong Kong Island, while Phillips Van Heusen Far East and WKK have upgraded into the new building from non-grade A offices in Tsim Sha Tsui and industrial offices in Kwun Tong, respectively.
Meanwhile, DHL has become the second-largest tenant to pre-commit to the forthcoming Enterprise Square 5, which is now more than 75 per cent pre-committed.
Desmond Poon Chi-ming, an associate director at Chartersince Surveyors, said One Kowloon was finding it easier to get tenants as it was one of the first among a number of buildings to be completed in Kowloon East.
But he said the district would feel pressure on rents and some landlords were expected to adopt a rent-cut strategy to attract tenants. Most of the supply will come next year and in 2009.
Kowloon East, which comprises Kowloon Bay and Kwun Tong, is expected to be Hong Kong's third-largest office market with a supply of 10 million sqft by 2010, compared with about five million sqft now, according to Savills' data.
Sun Hung Kai Properties has begun demolition work at the former Hong Kong Flour Mill site in Kwun Tong. The site, at the junction of Wai Yip, Lai Yip and Hoi Bun streets, will be redeveloped into a 292,550 sqft gross office building with completion scheduled for 2009.