China Everbright buys office block in Wan Chai for HK$10 billion in city’s second-largest office deal
Government’s move to increase office supply in CBDs expected to strengthen Hong Kong’s status as an international financial centre
State-owned enterprise China Everbright announced on Thursday it has agreed to buy the Dah Sing Financial Centre at Gloucester Road, Wan Chai, for HK$10 billion, in the second-largest office transaction in Hong Kong.
It is the latest sign of mainland enterprises’ eagerness to acquire prime Hong Kong office buildings. In November, Evergrande Real Estate paid a record HK$12.5 billion to buy Mass Mutual Tower, a prime office block at the corner of Gloucester and Jaffe roads, from Chinese Estates.
Also last year, China Life Insurance announced the purchase an office tower with retail space in Hung Hom from Wheelock & Co for HK$5.85 billion.
The Hong Kong government’s release of its long-awaited response to calls by multinational corporations for new office supply in central business districts (CBDs) will help the city strengthen its status as an international finance centre, property experts say.
“As multinational corporations ramp up their expansion plans, they hope to see a clear supply picture in the long run. That is what they have been calling for,” Marcos Chan, head of research at CBRE Hong Kong, Macau and Taiwan, said.
He said the land sales programme provided a more transparent long-term picture that would help the city maintain its position as a global finance centre.
Secretary for Development Paul Chan Mo-po announced the land sales programme for the fiscal year to March 2017 on Thursday, including the Murray Road car park site, which is expected to go for upwards of HK$9 billion. He also said the government would convert more suitable government sites such as Queensway Plaza site in Admiralty and the government site at Caroline Hill Road for commercial use.
The Murray Road car park site, providing a total developable gross floor area of 449,000 square feet, would not on its own ease rising rents as it was not large enough to significantly impact vacancy rates, Alex Barnes, head of Hong Kong markets at JLL, said.
But rents in Central would be affected in the short to medium term by supply coming onto the market in other districts, like Causeway Bay and Hong Kong East, which would provide relocation opportunities to traditional Central occupiers at a significant discount to current Central rents, he said.
Major occupiers have been calling for offices with larger floor plates in high-rise buildings in core business districts. Rising rents in Central have also made them concerned.
In a survey released by JLL yesterday, Hong Kong topped the list for most expensive office rents among global gateway cities, with rent for a top quality office costing an average of US$262 per square foot per year as strong tenant demand and a shortage of premium-grade space push prices up.
This compares with London, where rents in the best buildings averaged US$240 per square foot per year. Beijing ranked third at US$199 per square foot per year, followed by New York on US$171 per square foot.
“When the Queensway Plaza site that can provide 1 million sq ft of floor area is ready to put on the market, it will give a big relief to the tight supply situation in Hong Kong,” Marcos Chan said, estimating it would take two to three years.
He said he exected the sites would draw keen competition from developers and business end-users from the mainland or global insurers when they were ready for sale.
“The market has been witnessing strong demand for the en bloc sale of office buildings,” he said.