Sun Hung Kai Properties is to close selling an office tower at Shanghai IFC, Pudong, to HSBC Holdings for as much as five billion yuan next month, as foreign banks embark on an expansion spree in the mainland's larger cities, according to a mainland report.
The acquisition would probably set a record price for grade A office space in Shanghai provided various foreign banks are looking for world-class design development as their headquarters, analysts said.
Victor Lui Ting, an executive director at Sun Hung Kai Real Estate Agency, declined comment, saying he would explain details later. HSBC was unavailable for comment.
The office tower is part of a four million square foot, office-retail-hotel and serviced apartment project.
Shanghai IFC, in Lujiazui, the financial centre in Pudong, has three towers, including twin towers at 260 metres and 250 metres and an 85-metre tower. Tower One, comprising 900,000 sq ft of grade A office space, is expected to be completed in 2009. It includes a shopping mall and two luxury hotels managed by the Ritz-Carlton and W Hotels group.
The whole HK$8 billion project is slated for completion in phases from mid-2009 to 2010.
SHKP had agreed to sell an office block to HSBC for five billion yuan, the mainland Oriental Morning Post reported, without indicating its sources. The bank would be awarded the naming rights, the report said.
HSBC owns 4,800 square metres at HSBC Tower in Pudong after it paid US$33 million in 1999.
Property consultants said foreign banks had been looking for large bulk spaces for expansion in cities such as Shanghai and Beijing following the central government's move to open retail banking to overseas lenders last year.
William Cheuk, a director of office market at DTZ Debenham Tie Leung, said the prevailing record price for office space in Shanghai was US$6,000 per square metre in Puxi. 'Foreign banks and insurance companies are rushing to expand their operations to capitalise on robust economic growth in Shanghai,' he said.
Standard Chartered leased 11,420 square metres in UC Tower, UBS took up 5,200 square metres in Citigroup Tower, Rabobank leased 662 square metres in HSBC Tower and ABN AMRO leased 464 square metres in Azia Centre, according to Jones Lang LaSalle.
The sale of the office tower would be a departure from SHKP's original plan to keep Shanghai IFC for long-term investment.
Foreign banks are looking to expand in major mainland cities
Record price for office space in Shanghai (US$ per square metre): 6,000