Prospects look bright despite competition
One of the newest tenants to move into the more than four million sqft of office space at Tsim Sha Tsui's (TST) Harbour City is the West Kowloon Cultural District Authority, which has occupied more than 25,000 sqft as it sets about restoring a desolate part of Kowloon into an arts hub mixed with retail, office and residential space.
Dave Siu Wing-koon isn't bothered by the rise of potential rival premises being co-ordinated under his nose. The general manager (office leasing) at Harbour City Estates, the Wharf Group subsidiary which runs the development, is used to competition.
'When there's a new development the same question is asked. 'How do you see the threat to Harbour City?',' says Siu, recalling the hype around the opening of International Commerce Centre (ICC) and Elements mall. 'The ICC didn't take any tenants from us. Most of its tenants came from Central. They're targeting a different tenant profile.
'We're close to the West Kowloon Cultural District and after looking at all the options they eventually decided on the Gateway.' Siu notes that one of the West Kowloon authority's former senior executive resided in one of the Gateway's 499 serviced apartments.
'In terms of retail they have substantial space,' Siu says. 'I see it as a supplement and complement to Harbour City. We're still very strong on the retail side. If they want to build an office development, the standard is premium grade, just like ICC.'
Harbour City, built on the site of a former godown, is now a centre for fashion and luxury goods shops that are the jewels in its shopping complex. The two million sqft Harbour City, Hong Kong's largest shopping centre, boasts 600 shops, restaurants and a cinema complex.
Above it lies 4.35 million sqft of office space in the 10 blocks of Tower 1, Tower 2, Tower 6, Prudential Tower and Sun Life Tower of The Gateway, that are international grade A offices, along with Ocean Centre, World Finance Centre (North and South Towers), Wharf T&T Centre and World Commercial Centre, that house trading and logistic firms, fashion brands and toymakers. Its Pacific Club house offers 140,000 sqft of recreational, dining and business facilities for office tenants.
When the first five towers facing Canton Road were erected from 1977 to 1983, it became the most prestigious office address on Kowloon side, located close to the Star Ferry and the Peninsula Hotel. In the 1990s, five blocks overlooking the harbour were added, including the Prudential Tower and Sun Life Tower of The Gateway.
Its great vantage spot and convenience of being in the heart of a bustling shopping and entertainment district have made it a magnet for airlines, banks, multinationals and insurers.
Among the largest occupiers are the biggest names in the insurance business: AIA, Prudential, Sun Life and Zurich. Banks and airlines are other common tenants of Harbour City. Citibank, HSBC and Bank of China are valued tenants, alongside JAL, United Airlines and India's Jet Airways. Harbour City also houses logistics companies; toy manufacturers, such as Mattel, Bandai and Hasbro; technology firms, from Sony to Hitachi; and fashion brands such as Louis Vuitton, Coach and Zara.
As Hong Kong's business with the mainland has surged, its proximity to the Airport Express Kowloon station and the nearby China Hong Kong Ferry Terminal has benefited. Three world-class hotels and 499 apartments cater for business travellers and tourists.
When it comes to rivalry, Siu looks the other way from Kowloon West. Kowloon East is its biggest competitor right now, he says. Despite insurers relocating to new office space in Kowloon Bay and Kwun Tong, others are expanding in the heart of TST. Siu cites AIA and Prudential, which is taking another 70,000 sqft at Harbour City.
'While some are taking space in Kowloon East, they are also still taking space in Harbour City,' says Siu, who adds that with Kowloon East now 90 per cent completed, the leasing market in Tsim Sha Tsui will pick up. 'The square footage of those companies in our portfolio is about the same. We're still looking good.' With a renewal rate last year of 70 per cent, including key tenants such as Citibank, GlaxoSmithKline, Hyatt International, Singapore Telecom, Cathay Pacific and Land Bank of Taiwan, Harbour City has an overall occupancy of 95 per cent.
Harbour City offers offices from 500 sqft to 50,000 sqft, or from HK$29 to HK$38 per square foot, with Gateway Towers commanding HK$34 to HK$54 per square foot. Last year, it secured new commitments of 560,000 sqft, including from Taiwan Shin Kong Commercial Bank, Sony Global Treasury Services, LWK & Partners, Hauck Asia and Toray Industries.
Some tenants have moved from other parts of Kowloon as they upgrade their accommodation, including LWK & Partners which moved from Mong Kok, toy company Innovation First International from Sha Tin, and Toray Industries took an entire floor of more than 23,000 sqft after relocating from Jordan.
Siu says Harbour City has a strong tenant profile, with multinational companies that have great expansion potential.
An average 40 per cent of tenancy commitments come from expansion of existing tenants. Among the tenants who have expanded are Atkins China, American International Assurance Co, Hyatt International, Star Cruises and Estee Lauder.
Siu is confident about its prospects.
'We didn't see many tenants coming across the harbour before,' he says. 'With rents moving upwards, tenants will seriously consider coming across the water to Tsim Sha Tsui.'