China’s sportswear giant Li Ning buys Henderson Land’s Harbour East for US$282 million to house its Hong Kong headquarters

The 25-storey mixed office and retail building in North Point was acquired for HK$2.2 billion (US$282 million) to house Li Ning’s headquarters in Hong Kong
The purchase reflects Li-Ning’s view about the potential of its Hong Kong business and follows the lease of a 7,000 sq ft shop as its first flagship store last year

Hong Kong property

Cheryl Arcibal

Published: 12:47pm, 11 Dec 2023

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Li Ning, China’s biggest sportswear manufacturer, bought a 25-storey mixed office and retail building in North Point from Henderson Land for HK$2.2 billion (US$282 million), to house its headquarters in Hong Kong, in what is seen as a shot in the arm for the city’s slowing office property market.

Li Ning’s acquisition of the property comes at a challenging time for Hong Kong’s property sector, particularly the office segment, which is grappling with record-high vacancy rates.

The building, known as Harbour East, houses retail tenants such as Five Guys, Frites, Pacific Coffee and Subway, and has a total land area of about 9,600 sq ft and a gross floor of about 144,000 square feet. The building includes 22 storeys of office space and two storeys of retail areas.

“The purchase of the property for use as Hong Kong headquarters of the group via the acquisition demonstrates the group’s confidence in its business prospects in Hong Kong and marks the implementation of its plan to strengthen its business development internationally,” the company said in a filing with the Hong Kong exchange late on Sunday.

Image of Harbour East, North Point. Photo: Google Map

“The board believes that the development potential of the group’s business in Hong Kong is substantial,” the filing said.

Li Ning’s purchase emerges amid declining office rents in one of the world’s priciest property markets.

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In October, average monthly rent per square foot for Hong Kong offices declined by 0.5 per cent to HK$52.60 per square foot, according to property consultant JLL.

Although, overall vacancy rate dropped to 12.6 per cent from 12.7 per cent in September, those for office properties in certain Hong Kong Island neighbourhoods, like the Central district, edged up to 9.8 per cent from 9.6 per cent while those in the eastern part of the Hong Kong Island rose to 13.3 per cent from 13.1 per cent in the previous month, JLL said.

“This is good news for the capital markets as investors have been quiet for a while,” said Martin Wong, director and head of research and consultancy for Greater China at Knight Frank. “Given that the current interest rate is still at a high level, cash buyers would be more likely to make a move, especially on distressed assets.”

However, Li Ning’s optimism about its prospects in Hong Kong was not shared by the stock market, and its shares fell 15 per cent to HK$18.12 as of 11am. So far this year, the stock has fallen nearly 74 per cent as the company struggled with slowing sales.

“The performance of its shares had nothing to do with its purchase of a property in Hong Kong,” said Louis Tse Ming-kwong, managing director of brokerage Wealthy Securities. “It is a good time to buy a property to build their headquarters in Hong Kong. I would say it is because other mainland Chinese brands have become more competitive amid a slowing economy.”

Tse added that there was no “impetus” for consumers to buy Li Ning products.

“Li Ning has been trying to clear their inventory and they are reducing their prices but you cannot buy running shoes every day,” he said. “If you buy a pair of running shoes today, you will not be buying them again next month. I do not see any new sales strategy for the brand to get more market share.”

Last year, Li Ning leased a 7,000 sq ft shop on Canton Road for HK$2 million a month, which was billed as its first flagship store in Hong Kong.

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