Chinese tenants continue their march into Hong Kong’s premium office space, driving up rents
Mainland firms took up 48 per cent of new office space offered in Hong Kong in the first nine months of the year, according to JLL’s survey.
Chinese companies continued their march into Hong Kong’s commercial space in the first three quarters, pushing the cost of renting offices in the city to the world’s highest in square footage terms, according to property consultant JLL.
Tenants with home bases in mainland China took up 48 per cent of new space offered in Hong Kong, according to JLL’s Premium Office Rent Tracker data, which surveys the highest achievable price in offices exceeding 10,000 square feet of space in 54 major markets in 46 major cities.
“Hong Kong’s high premium office rents are driven by ongoing supply shortages and high demand from firms from mainland China,” said JLL’s Hong Kong market director Kenny Yu. “Mainland firms have slowed down acquisitions amid Beijing’s capital control. But they continue to expand businesses in Hong Kong and Asia under the central government’s One Belt One Road initiative.”
Hong Kong’s office rent soared to the top of the world for the second year running, with the most expensive office space in the central business district demanding US$323 (HK$2,523) per square foot per annum, or HK$210 per sq ft per month. New York’s Midtown is in second place, followed by the West End in London, the Finance Street in Beijing and the Silicon Valley in California. Shenzhen, the largest economy in southern China, made it to the list of the world’s 10 most expensive urban centres for the first time, at eighth position.
One of Hong Kong’s most notable office lease this year was the 24,200 sq ft transaction signed by the financial arm of China Huarong Asset Management, at the Bank of China tower in Central. Earlier this year, the Industrial Bank, a lender based in the Fujian provincial capital of Fuzhou, leased three floors at One International Finance Centre, one of the city’s most expensive towers.
“Mainland companies are expected to remain active in Central’s office leasing market next year,” said JLL’s head of Hong Kong market Alex Barnes. “We expect Central’s Grade A office rents to grow by up to 5 per cent in 2018.”
In a separate report, property consultant Cushman & Wakefield said high rents in the central business district had led to a rebalancing of demand. While the expansion of mainland companies in Central, Admiralty and Sheung Wan should support rental growth of 7 per cent to 9 per cent for the district next year, multinational companies are relocating to non-core areas and co-working players are taking up large floor allocations in various districts.
China’s strong economic growth was lifting the office rental charges all over the country, spilling over the border to Hong Kong, JLL said. That added Shenzhen’s Futian and Shanghai’s Pudong districts to the list of the most expensive rents, said JLL’s managing director Jeremy Sheldon.
Asia’s buoyant stock markets have bolstered the valuations of technology companies, enriching them to the extent that they are willing to splurge on premium office space, JLL said.