Seeking to hedge against rising rents and a shortage of space, banks and insurers are on a record spree of buying office buildings in Hong Kong, where occupancy costs are the second-highest in the world. Manulife Financial, Canada's biggest insurer, and Hang Seng Bank this year bought office towers in the city, joining financial firms such as AIA Group and Agricultural Bank of China in spending more than HK$18.8 billion on commercial properties from January last year to last month, according to Cushman & Wakefield. That is the most for a 16-month period on record, the broker's data shows. Companies are looking to secure space in the city where new office supply will fall a third short of demand by the end of the decade, according to Rhodri James, an executive director for office services at CBRE Group. The office vacancy rate in Hong Kong fell to 3.3 per cent in the first quarter, the lowest in Asia behind Beijing, the broker says. "This spate of purchases by financial institutions is unprecedented," said Sigrid Zialcita, the Singapore-based managing director for Asia-Pacific research at Cushman & Wakefield. "It allows them to manage their costs, especially given the high rents and the propensity for continual rent increases in this supply-constrained environment." Manulife on April 10 said it would buy a 512,000 sq ft tower in Kowloon East from Wheelock for HK$4.5 billion, the second-highest price paid for an office building in the city. On completion in 2015, it will be used as the headquarters for the insurer's 1,200 staff and 5,500 agents. The largest deal on record is Agricultural Bank of China's purchase last year of 50 Connaught Road in Central for HK$4.9 billion. Hang Seng Bank paid HK$2.9 billion in February for a 30-floor office building in Mong Kok, while AIA, the city's second-biggest insurer, in October last year bought the 300,000 sq ft Stanhope House in Quarry Bay for HK$2.4 billion. As of January, financial services companies accounted for 49 per cent of prime office tenants in Central, CBRE data shows. More buildings were coming to the market that might be snapped up by financial firms, said Daniel Chow, a general manager for sales and distribution for consumer banking at Standard Chartered. Jones Lang LaSalle has been appointed by Wing Hang Bank to auction a 27-storey office building in Wan Chai, the broker said last month. Last year, Jones Lang was hired by Sino Land to seek buyers for the 330,000 sq ft Centrium office and retail complex in Central that the developer valued at HK$7 billion. "We're going to see more financial companies considering to buy commercial buildings as their offices or branches," Chow said. Rents probably will not fall significantly because Hong Kong has one of the world's lowest office vacancy rates. Developers are likely to add about 11 million sq ft by 2020, compared with projected new demand of 17 million sq ft over that period, according to CBRE. Office rents in Central rose to the world's highest in 2008 before dropping one place at the end of last year, Cushman & Wakefield says. With supply tightening in Central, Kowloon East has emerged as the fastest-growing office location for financial companies. Sun Hung Kai Properties and Henderson Land Development are among developers that have completed commercial projects in the area in the past decade.