The transformation of Kowloon East into a decentralised hub for corporate offices is continuing at a rapid pace.
The 25-storey MG Tower at Hoi Bun Road in Kwun Tong is the latest new building to be completed, adding 620,000 sqft of office space.
Kowloon East has grown with former factory buildings being transformed into modern office towers. With 18 million sqft of grade-A office space, the district is the third largest commercial centre in the city after Central, Wan Chai and Causeway Bay.
'There's no question that Kowloon East will become the largest commercial district in Hong Kong, taking a vital role as the key non-core commercial centre,' says Gavin Morgan, deputy managing director and head of leasing at Jones Lang LaSalle.
'Supply is increasing and non-core businesses are migrating there. It's also important to remember that Kowloon East is close to a significant proportion of the city's workforce.'
Thomas Lam, director and head of research at Knight Frank, says Kowloon East appeals as an office location for information technology, construction and manufacturing sectors, and back office functions for financial services providers.
Bank of China committed earlier this year to lease about 25,000 sqft of office space at Millennium City Phase 5 in Kwun Tong for an average rental of about HK$30 per sqft.
Not only are asking prices highly competitive, but Lam says additional supply should help to restrain future rental increases.
Kwun Tong and Kowloon Bay, along with Aberdeen on Hong Kong Island, will be adding significant amounts of new office space in the next few years.
Rentals for prime locations in Kowloon East have risen this year by about 16 per cent to HK$29.80 per sqft, according to Colliers International.
Along with relocation from other more costly districts, corporate expansion has been another driving force for demand in Kowloon East.
Citizen Watch Co leased 20,000 sqft of space, while insurers - including Manulife, Zurich and AIA - have all moved some offices to Kowloon East, and sourcing and manufacturing companies, such as Nike and Siemens, have added space there.
Agents say Sun Kung Kai Properties' five-tower mega-development Millennium City is the most sought-after location due to its location near MTR stations in Kwun Tong and Ngau Tau Kok.
Landmark East and Manulife Financial Centre are also popular towers in Kwun Tong, while Enterprise Square and Exchange Tower are among the leading choices in Kowloon Bay.
Another notable feature of the Kowloon East market is the relatively high proportion of strata-title office owners in new buildings such as MG Tower, Billion Centre and C-Bons International Centre.
Colliers International noted that strata-title owners are usually the first to react by offering lower rents than portfolio owners.
This means rental growth momentum in the district is likely to face substantial pressure if demand starts to falter.
According to Lam, Kowloon East's attractiveness as an office location looks set to increase in the medium to long term. Redevelopment of the former Kai Tak airport site, scheduled for completion in 2015/16, will add a new dimension, with a cruise terminal, a sports stadium, residential and commercial buildings, plus an extra 7 million sqft of office space.
Convenient new transport options will come with the opening of the Sha Tin to Central rail link in 2020, including a station at Kai Tak.
In Kwun Tong, the old town centre will be transformed by the Yue Man Square redevelopment. Costing in excess of HK$30 billion, it aims to turn a mainly rundown area into the greenest urban centre in Hong Kong by 2020.