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Wednesday 3 December 2008
Mainland firms fill office space left by foreigners
Hong Kong office landlords are increasingly looking to mainland firms and especially big financial institutions to take up space being vacated by existing tenants.
Mainland firms fill office space left by foreigners
Yvonne Liu 3 December 2008
Hong Kong office landlords are increasingly looking to mainland firms and especially big financial institutions to take up space being vacated by existing tenants.
In one deal, Industrial and Commercial International Capital, a subsidiary of the nation’s biggest bank, Industrial and Commercial Bank of China, leased 30,000 square feet on two floors at Three Pacific Place in Admiralty, property agents said.
Agricultural Bank of China, the mainland’s third-largest bank, meanwhile took a lease on 10,000 sq ft of space at One Pacific Place. Agents believed the bank leased the space as part of its plan to list in Hong Kong next year.
The bank’s vice-president, Pan Gongsheng, said in October that preparations for the bank’s initial public offering would be completed in the second half of next year.
“The transactions do not mean that mainland tenants have necessarily become more aggressive in leasing office properties,” a property agent said. “The situation is rather that non-mainland tenants, particularly foreign financial institutions, have held up their leasing plans.”
But with foreign financial institutions among the biggest casualties of the global credit crisis, mainland firms were now being more actively courted by landlords.
Property agents said the full picture on rents was not available from data in the Land Registry. “Rents may be subject to sweeteners offered behind the scenes by developers, including longer rent-free periods,” the agent said.
Meanwhile, a growing number of foreign newcomers were looking for fitted-out office space surrendered by other firms in Hong Kong, he added. “They are more cautious about spending money as a result of the global financial crisis. It saves to lease fitted office space.”
Companies still in search of offices include investment funds or legal firms looking to set up shop in Hong Kong from the United States or Europe and typically wanted between 3,000 and 5,000 sq ft in Central.
According to a Knight Frank market report, average rents of grade A offices dropped 7.2 per cent in October after falling 3.4 per cent in September. Admiralty suffered the biggest rental fall of 10.8 per cent. The firm expects leasing activity to recover in the coming months as companies become increasingly cost-sensitive and more tenants seek to decentralise to fringe and non-core areas.
This trend is likely to prompt landlords to adopt even greater flexibility when making decisions on lease renewal or committing to new leases.
Property advisory group Jones Lang LaSalle Hong Kong expects the retreat in office rentals to continue until the end of 2010.
Marcos Chan, the head of research, said average rentals in Central could fall to below HK$70 per square foot over this period and return to mid-2006 levels.
“The office market sentiment is poor. No company will expand right now. Most of the office buildings are suffering downward pressure in rents, particularly offices in east Kowloon.”
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Mainland firms fill office space left by foreigners
Yvonne Liu
3 December 2008
Hong Kong office landlords are increasingly looking to mainland firms and especially big financial institutions to take up space being vacated by existing tenants.
In one deal, Industrial and Commercial International Capital, a subsidiary of the nation’s biggest bank, Industrial and Commercial Bank of China, leased 30,000 square feet on two floors at Three Pacific Place in Admiralty, property agents said.
Agricultural Bank of China, the mainland’s third-largest bank, meanwhile took a lease on 10,000 sq ft of space at One Pacific Place. Agents believed the bank leased the space as part of its plan to list in Hong Kong next year.
The bank’s vice-president, Pan Gongsheng, said in October that preparations for the bank’s initial public offering would be completed in the second half of next year.
“The transactions do not mean that mainland tenants have necessarily become more aggressive in leasing office properties,” a property agent said. “The situation is rather that non-mainland tenants, particularly foreign financial institutions, have held up their leasing plans.”
But with foreign financial institutions among the biggest casualties of the global credit crisis, mainland firms were now being more actively courted by landlords.
Property agents said the full picture on rents was not available from data in the Land Registry. “Rents may be subject to sweeteners offered behind the scenes by developers, including longer rent-free periods,” the agent said.
Meanwhile, a growing number of foreign newcomers were looking for fitted-out office space surrendered by other firms in Hong Kong, he added. “They are more cautious about spending money as a result of the global financial crisis. It saves to lease fitted office space.”
Companies still in search of offices include investment funds or legal firms looking to set up shop in Hong Kong from the United States or Europe and typically wanted between 3,000 and 5,000 sq ft in Central.
According to a Knight Frank market report, average rents of grade A offices dropped 7.2 per cent in October after falling 3.4 per cent in September. Admiralty suffered the biggest rental fall of 10.8 per cent. The firm expects leasing activity to recover in the coming months as companies become increasingly cost-sensitive and more tenants seek to decentralise to fringe and non-core areas.
This trend is likely to prompt landlords to adopt even greater flexibility when making decisions on lease renewal or committing to new leases.
Property advisory group Jones Lang LaSalle Hong Kong expects the retreat in office rentals to continue until the end of 2010.
Marcos Chan, the head of research, said average rentals in Central could fall to below HK$70 per square foot over this period and return to mid-2006 levels.
“The office market sentiment is poor. No company will expand right now. Most of the office buildings are suffering downward pressure in rents, particularly offices in east Kowloon.”
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