Citi downsizes Central office with move to East Kowloon
With rents in Central continuing to rise, more banks and financial institutions could move to East Kowloon or other commercial areas, says Citi’s Hong Kong head
The Hong Kong head of US giant lender Citi, Weber Lo has led the bank’s 3,200 strong team in the city to exit Central and other offices for a new hotspot office in Kowloon East, in a trend that its peers may follow as rising rents in the financial district show no signs of abating .
“I believe it would be a trend for other banks or financial firms to consider to move away from Central to Kowloon East or other new commercial areas to achieve a cheaper cost and for a better working environment for staff,” Lo told the South China Morning Post in his spacious office with a 270-degree seaview in Citi Tower in East Kowloon.
“This is comparable to London, there are many banks that have moved away from the traditional centre of London, and moved to Canary Wharf,” he said.
“Moving away from Central to Kowloon, which is our own property, not only reduces the cost, but more importantly, the move allows us to consolidate our five offices into two, housing all our staff under two roofs that enhances communication, operational efficiency and morale.”
Technology advancement and the change in the residential community in the past two decades since the handover of Hong Kong to China also made it possible for banks to move away from Central, Lo said.
“We have around 60 per cent of staff who live in Kowloon, such as in Tseung Kwan O and Tiu Keng Leng, which means it is closer to home for them, to work on Kowloon side. Technology also helps as we can easily communicate with our customers, vendors and colleagues who could be anywhere in Hong Kong. We do not necessarily all have to be located in Central.
Before the days of the mobile phone and the internet, bankers need to be located in Central as it was easier to meet with their clients and peers.
In its more than 115 years’ history, Citi has always rented premises in Central to house its major office, and being a neighbour to peers such as HSBC, Standard Chartered Bank and Bank of China.
It previously rented 15 floors in Citi Tower on Garden Road and four offices in Quarry Bay, Tsim Sha Tsui and Hung Hom for its 4,500 staff.
While some banks have moved their back offices to Quarry Bay or Kowloon in recent years, most have kept their headquarters in Central.
Citi went one step further by moving its headquarters and major office to Kowloon.
The bank decided in 2014 to spend HK$5.42 billion on a new building in Kowloon East to be used as its major office. It was the largest single office building transaction in Hong Kong at that time.
The Citi headquarters in Kowloon East was built by Wheelock Properties and the whole block of Grade A office space has 21 floors and a total gross floor area of 512,000 square feet.
Lo and 3,200 staff have moved last year to the new building, which is known as the Hong Kong headquarters. The office in Central has been downsized from 13.5 floors to 9.5 floors with about 1,000 staff. There are about 400 staff working at Citi branches.
It is hard to calculate how much costs had been saved as the bank now owns its Kowloon premises. But the rent in Kowloon East is about HK$30 per sq ft, or a quarter of those in Central.
“The latest property land sales in Central showed that the rent will continue to trend up all the way to 2020 at HK$160 per sq ft, the breakeven figure as some analysts predicted,” Lo said.
“Now the cost for our Kowloon headquarters is only around HK$30 per sq ft. Fact that we feel confident to continue to operate in Hong Kong, and given the volatility in rent, we feel we can’t go very wrong with this purchase decision,” he said.
But still, Lo admitted they could not completely abandon Central.
“I do not think we can completely abandon Central. For now there are strategic reasons to continue to have a presence there, particularly to cater to some our client segments, and for meeting the regulators,” he said.
“However, if the rents keep rising, we may further reduce the Central office to a smaller size and move more operations to our Kowloon East headquarters.”