As the US economy cools and financial institutions look to the Asia-Pacific to spearhead growth, a number of major players have announced plans to expand their Hong Kong businesses into new office space.
Most recently, US investment bank JP Morgan announced in January that it would lease up to 237,000 sqft over 11 floors in One Island East, the largest transaction for the Swire Properties-owned complex in Quarry Bay. JP Morgan, which aims to move about 700 staff to One Island East by August this year, said the low vacancy rate in Central meant it had to look further afield for new space.
'The Hong Kong property market for offices is tight and very few new buildings are earmarked to become available within several years,' said Roy Kinnear, managing director and chief operating officer of JP Morgan Asia Pacific.
'This might change when other major businesses move, but right now the lack of space in Central and surrounding areas was the first issue we had to consider during our expansion plans.'
While JP Morgan has offices in five locations - the 10 floors in Chater House that will remain the group's headquarters, 11/2 floors in Exchange Square, a small fund shop in Jardine House, and back office support in Sha Tin and Mong Kok - the company's lease in One Island East reflects plans to double staff from the present quota of 2,200 to about 5,000 by 2010 or 2011.
'Traditionally we have always underestimated our growth,' said Mr Kinnear. 'There will be ups and downs but you need to look to the long-term, and we are expecting potentially double-digit growth in percentage terms for the next three or four years.'
It is based on this figure of staff expansion that a company works out how many floors it needs to expand. 'In our business you need staff to bring in extra revenue,' said Mr Kinnear, 'so you put together a number of different scenarios of what the likely staff growth would be. You then think about how many people you want on each floor. Our corporate real estate team is a group of experts who know what capacity is best for a certain size floor, depending on specific business needs, for example a trading floor is very different from a research area.'
JP Morgan's increased headcount will far exceed the capacity of its already cramped Chater House headquarters and smaller offices. One Island East, being located in a well developed business area with two MTR links, a good bus service, parking for 1,420 private vehicles, and ample shopping outlets, restaurants and leisure activities, made an attractive option.
'We started off with a reasonably narrow supply, and taking into account our needs, including costs, One Island East suited our plans - it's a quality building, a quality landlord, well established location and the timing was right for us,' said Mr Kinnear.
The building, which is expected to be completed this month, will offer 59 levels of office accommodation contained within an environmentally efficient glass and stainless steel structure. Flanking the space is an extensive landscaped plaza with a connected walkway system leading to Taikoo Place shopping centre, Taikoo Shing and the Quarry Bay MTR station.
The staff initially identified to move will be mainly from the investment banking technology and operations groups, parts of the treasury and securities services business and other support functions. Frontline staff dealing directly with clients will remain in the Central offices.
Both in-house and external designers have been commissioned to work on the interior and the new office will have access to JP Morgan's large art collection.
'We are trying to keep the overall JP Morgan look, feel and touch, but we have multiple options on how to arrange the space,' said Mr Kinnear. 'It's mainly for our treasury and securities services group, technology, operations and other supporting staff, so the interior layout will have to be serviceable, comfortable, convenient and with appropriate space allocation. We are interviewing the different departments to work out the optimal layout. Some will need training or meeting rooms, and there will be a mix of cubicles and trading-style bench desks.'
Staff will use the same phone system and desktop technology as in the other offices, but the firm is also considering setting up a 'hoot 'n'holler' system - a live spoken communication system - to connect staff to Chater House and Exchange Square. 'We want to attract the right people, so a good layout with a technological bent may give us the edge to attract talent in a competitive market,' said Mr Kinnear.
Staff having to relocate to the Quarry Bay office will not be compensated for travel costs but the company may set up a bus service between One Island East and Central. The firm will also provide 'hot desks' or floating offices in the various offices so that staff do not have to commute between sites for meetings.
The new office will require some adjustment but JP Morgan sees the expansion as a success story. 'It will give us an opportunity to make space in our existing offices and put departments into a space specifically set up for them. Also, overall, hopefully a growing business is a successful business, and it's important for employees to be part of this,' said Mr Kinnear.
DBS will join JP Morgan as new tenants, also taking over 11 floors, and close its Central and Wan Chai businesses. Morgan Stanley plans to move out of its Exchange Square offices, relocating to Sun Hung Kai Properties' International Commerce Centre in West Kowloon, where it will take 10 floors with 350,000 sqft. Credit Suisse Group will also leave Exchange Square and lease offices in the ICC. By 2011, the firm expects to be leasing the top 10 office floors with a total area of 300,000 sqft - a floor space expansion of 40 per cent.