Insurers strike big deals in Hong Kong office market
Firms targeting mainland market see city as stepping stone, says analyst, as insurers fill gap left by other financial institutions
Insurance companies remain active players in the office investment and leasing markets, filling the gap left by a retreat by other major financial institutions.
Among the most recent major deals by an insurer seeking alternative office space was the en-bloc lease of Swire Properties' renovated office building at 8 Queen's Road East in Wan Chai to Europe-based insurance company Assicurazioni Generali.
"We are pleased to confirm that we have leased the whole building at 8 Queen's Road East to Assicurazioni Generali, with naming rights and a tenancy period of 10 years," a Swire spokesman said.
The 19-storey building is nearby another Swire office building, Three Pacific Place.
The developer began renovating 8 Queens Road in the first half of last year after it bought out all the owners.
The renovation is scheduled for completion soon.
The office tower will provide a gross floor area of 67,000 square feet. It is one of two new office projects that Swire is releasing for leasing this year, the other being the former Tai Sang Commercial Building at 28 Hennessy Road.
Assicurazioni Generali is now operating out of offices at Times Square in Causeway Bay.
Property agents said it was moving because it needed more space and also to build its brand in the city.
"The leasing agreement included naming rights, which helps to enhance the image of the company," an agent said.
According to research done by property agency Cushman & Wakefield, 78 per cent of new leasing transactions in Greater Central, which includes Sheung Wan, Central and Admiralty, are for spaces of less than 10,000 sq ft.
In the investment market, American International Assurance (AIA) spent HK$2.4 billion to buy the whole of Hang Lung Properties' Stanhope House in Quarry Bay on October 18.
The building has a floor area of 299,615 square feet and AIA bought the building as an investment as well as to provide its own office space.
"Insurers are targeting the mainland market and Hong Kong can act as a stepping stone to enter that market," said Kenny Kwok, an assistant sales director at Midland IC&I.
"The current share of the mainland market for foreign insurance companies is less than 10 per cent."
Gary Fok, a senior director in the commercial department at Cushman & Wakefield, said demand for office leases from banks and other financial institutions remained weak, meaning the demand for office space is mainly from other industries.
"With the exception of some prime building premises, the Greater Central area saw moderate demand for office space and new lease activity has been stable," Fok said.
"We expect occupiers to continue to seek out solutions to meet their requirements, especially among grade-A buildings, where landlords are willing to entertain offers below HK$90 to HK$100 per square foot."
But with demand for office space from most financial institutions on the wane, large whole-floor spaces in prime buildings, notably those priced above the HK$100 per square foot threshold, were not likely to see major improvement in demand in the short term, Fok said.