Hong Kong’s record office rents drive more firms out of Central to outer suburbs
Reflecting the change in business dynamics, mainland Chinese firms are moving into Central while European and US firms are shifting out
More European and US companies operating in Hong Kong are moving out of the city’s Central district, relocating their offices to outer suburbs to save on rent in the world’s costliest major urban centre.
In the latest sign of the change, legal firm Freshfields Bruckhaus Deringer and asset manager Alliance Bernstein will both move out of Central to relocate to Quarry Bay, where the average rental rate is listed at less than half of their current leases.
London-based Freshfields will leave Central when the lease of its 30,000 sq ft Two Exchange Square office expires in the first quarter of 2018, moving into a 40,000 sq ft space over two floors at Swire Properties’ One Island East offices.
New York-based Alliance Bernstein will vacate its 30,000 sq ft office at One IFC at the end of 2017, moving into a similar-size office over one and half floors at the same Swire project in Quarry Bay.
“This will have significant impact on the market as it’s the first time such a big legal firm is moving out of Central,”said Alan Lok, executive director and head of advisory & transaction services for office at CBRE.
Neither Freshfields nor Alliance could be contacted for comments.
Hong Kong is the world’s costliest major city to live and work in, with residential prices and apartment rents topping the global ranking more than five years in a row. Commercial property rents have risen 16 per cent in the three years to March 2016, according to CBRE’s data.
The average office rent in Central is HK$110 per square foot per month, more than double the HK$47 per square foot in the city’s eastern suburbs like Quarry Bay, representing a significant cost saving in any such relocation, Lok said.
Reflecting the shifts in business dynamics and economic power play, the tenancy mix in Central’s offices has changed. European financial firms have reduced their presence in the broader Central district by 146,000 sq ft in the three-year period to March 2016, while US firms have cut theirs by 28,000 sq ft, according to CBRE’s its latest survey of 200 Grade-A office buildings.
Chinese companies have moved in to fill the vacancy, increasing their presence by 633,000 sq ft during the same period, CBRE said.
Berwin Leighton Paisner (BLP) announced last year a plan to relocate from its office at the Agricultural Bank of China Building in Central to Dorset House at Swire’s Taikoo Place project in Quarry Bay.
London-based BLP signed a six-year lease for 15,000 sq ft of space at Dorset House, which can accommodate nearly 100 people, becoming the first international legal firm to set up shop in Quarry Bay.
Ince & Co, a London-based law firm that specialises in maritime and shipping law, also moved out of its Citibank Plaza office in Central to Swire’s One Island East.
More businesses will be seeking out space at Taikoo Place, where a HK$15 billion redevelopment will put two Grade A office buildings each with around 1 million sq ft of gross floor area on the market by 2018 and 2021, Lok said.