Banks and insurance companies have launched a strategy to acquire office buildings in Hong Kong. Rents are rising, while the amount of available space is on the decline in the location where occupancy costs are the second-highest in the world.
Canadian insurance company Manulife Financial Corp and Hang Seng Bank Ltd. have bought office buildings in 2013. They join other financial firms, such as Agricultural Bank of China Ltd. and AIA Group Ltd., which have both invested heavily since the beginning of the year.
Rhodri James, executive director of office services at CBRE, pointed out that the level of new office supply is expected to “fall a third short of demand by the end of the decade.”
The office vacancy rate in Hong Kong dropped to 3.3 per cent in Q1, which was the lowest level in Asia after Beijing, according to CBRE’s figures.
Demand for office space in Hong Kong has been growing since the former British colony that was returned to Chinese jurisdiction in 1997 has become a regional hub for banks and brokerages in the world’s second-largest economy. Hong Kong has led the world in initial public offerings in 2010. Companies have raised $58 billion through the sales of initial shares.
Daniel Chow, the general manager for sales and distribution for consumer banking at Standard Chartered Plc, points out that more property is coming onto the market that may be bought by financial firms.
Jones Lang LaSalle Inc. has been appointed by Wing Hang Bank Ltd. to sell a 27-story office building in Wan Chai. This district, located to the east of Central, is known for its Central Plaza, which was once the tallest building in Hong Kong, as well as its active nightlife.
Low office vacancy rates mean that rents in Hong Kong will probably remain high. Developers are likely to add 11 million sq ft of space by 2020. CBRE is projecting the new demand during the same period at 17 million sq ft.
In 2008, office rents in the Central district were the highest in the world. By 2012 they were second only to London’s West End where the average price is £168 per square foot. Hong Kong was next on the list at £118 per sq ft, followed by Rio de Janeiro at £106.
