Gentrifying Wong Chuk Hang on the up and up as Hong Kong’s business hub with cheaper rents
Accountancy major KPMG negotiating 150,000 sq ft of space in Swire Properties’ soon to be ready South Island Place
A growing number of international financial institutions are planning to relocate away from traditional prime areas as they look for larger and cheaper office space and within easy reach of the city’s main business district. And Wong Chuk Hang fits the bill perfectly.
With rents for grade A offices in Central and Causeway Bay nearing record highs, some blue chip corporate tenants are heading for the old industrial district in the south of Hong Kong Island, where some of the cheapest rents for premium office can be found in the city, said market watchers.
“The current rent there is only about a third of that in Central,” said James Mak, district sales director at property broker Midland Commercial. “International companies, particularly those in finance and banking, who usually need larger space, are considering a move to Wong Chuk Hang from Central, Wan Chai or even Causeway Bay.”
Mak expects the transition to accelerate if the first big name, KPMG, moves to the gentrifying hub east of Aberdeen.
The insurer AXA and international news channel CNN are among some of the top companies that have already moved there.
Market sources said that the international accounting firm is negotiating with Swire Properties for as much as 150,000 square feet of space in South Island Place, which could help it save up to 34 per cent in rent.
The 28-storey building will provide 382,500 sq ft of gross floor area when it is ready later this year.
“This space could easily accommodate as many as 3,000 people,” said Vincent Cheung, deputy managing director for Asia valuation and advisory services at Colliers International.
KPMG has around 2,000 staff in Hong Kong. It also has an office in Prince’s Building in Central, which agents believe KPMG will keep to maintain its presence in the city’s core financial hub and will probably move out from Causeway Bay if it successfully negotiates the lease for South Island Place.
KPMG declined to comment on the lease.
According to Mak, the rent at South Island Place is expected to be about HK$35 per sq ft per month, compared to nearly HK$100 per sq ft at Hysan Place in Causeway Bay, where KPMG has an office.
KPMG signed a nine-year lease with Hysan Place in 2011, occupying about 80,000 sq ft from the 20th to 25th floors. Agents said that the rents the firm paid would have been between HK$50 to HK$60 per sq ft.
“If moving to a new place can save a company about half of the rent, the answer is obvious,” said Paul Yien, regional director of Hong Kong markets at JLL. “Rent always comes first when a company chooses an office. Plus, these office buildings in Wong Chuk Hang are new and have good quality facilities.”
According to JLL, the average rent for grade A office in Wong Chuk Hang is HK$32.8 per sq ft, while in Central it is more than three times higher at HK$123.7 per sq ft, and around HK$67.7 per sq ft in Wan Chai and Causeway Bay.
“It [Wong Chuk Hang] is the cheapest place on Hong Kong Island where you can find grade A office,” said John Siu, managing director of Cushman and Wakefield. “And in 10 minutes you can reach Central and meet your clients.”
The new MTR extension linking the southern part of Hong Kong Island to Admiralty opened on December 28, 2016. It makes Wong Chuk Hang much closer to Central than other decentralised submarkets, including Quarry Bay on the east side of Hong Kong Island and Kowloon East.
Some recently opened top grade office buildings in the district include One Island South, AXA Southside, and 41 Heung Yip Road.
“The median building age stood at 26 years old for Central while in Wong Chuk Hang, the median building age is just five years old. Tech savvy sectors, banking and finance, as well as IT firms may find new buildings attractive,” Alan Lok, executive director for advisory and transaction services at CBRE.