Hong Kong Land confident despite drop in city office rent


The IFC complex, Exchange Square, and Jardine House along Central’s waterfront

Hongkong Land has rented a few more floors in its Exchange Square complex, and the leading developer’s commercial real estate manager seems confident that big companies will want to stay in the heart of the world’s most expensive business district.

“We always perform much better than the market, and it shows the resilience of the portfolio,” said Raymond Chow, executive director of Hongkong Land, who is in charge of the company’s business portfolio – much of which constitutes the heart of Central. district.

Chow’s optimism may have received a boost in April when China Life Franklin Asset Management signed for a full floor at One Exchange Square, and that deal was signed just before a U.S. financial information provider. occupies two floors in another tower of the port complex.

The 27-year-old Hong Kong veteran doesn’t seem surprised by the rebound in leasing, which he sees as a testament to the central district’s continued importance.

With the unparalleled density of finance companies in the city’s traditional shopping center, Chow points to the neighborhood’s “unparalleled efficiency”, as well as some of the work Hongkong Land has done to ensure that properties like Exchange Square, Jardine House and Landmark complex, maintaining demand for some of the most expensive offices in the world.

Chow’s confidence in the market comes despite an overall vacancy in Central’s office market that fell from 7.3% in March to 7.5% in April, and a continuing trend towards large multinationals daring to move their operations to emerging business districts such as East Hong Kong Island and Kowloon East in search of savings.

An old friend returns

While office rentals in Hong Kong have been on the decline since 2019, Hong Kong Land managed to push its average rents in its central office portfolio to HK $ 120 per square foot last year, from HK $ 118 a year higher. early.

Raymond Chow of Hong Kong Land preaches the gospel of efficiency

In May, however, the owner of properties including Jardine House and the Landmark complex said rental reversals at his prime office buildings had turned negative as the physical vacancy rate rose to 7.6% by the end of the year. March, against 6.3% at the end of March. 2020.

In its first quarter report, however, the company said new office rentals “saw a modest increase over the period due to improved sentiment and a narrowing rental gap. between the center and other parts of the city “.

Chow sees that the increase in business confidence comes from a number of sources.

“People feel like the vaccination process is much better, and the momentum and strength of the Hong Kong IPOs are just fantastic,” he said. And he ties this revival of Hong Kong’s business spirit to signs of a resumption of activity in the company’s office portfolio.

“We’ve seen a lot of demand coming in,” Chow said. Recently, we announced that Standard & Poor is moving back to Central and that they occupy approximately 22,000 square feet in Exchange Square. These are signs that the market is improving and there is no doubt that the level of investigations is increasing.

After moving from the Edinburgh home of Hong Kong Land to a location in Kowloon in 2012, Standard & Poor’s S&P Global division moved into a two-story space at Three Exchange Square in early May.

Chow also points out that despite a drop in rents at the macro level, his last major lease at Three Exchange represented a positive rent reversal from the previous deal covering the lower zone space.

“The overall ecosystem that we provide is quite unique and we see this as a flight to quality,” he added.

Descent market data points

Chow is keeping its towers full despite the fact that the Class A office market in Hong Kong contracted 99,400 square feet in April, according to the latest figures from JLL, after a contraction of 100,500 square feet in March.

Other problems stem from the emergence of alternative business poles in Hong Kong, where Central has long reigned as the preferred location for companies looking for prestigious addresses and top talent.

Data Center Forum

Earlier this year, Swiss bank Julius Baier leased four floors in Swire Properties’ Two Taikoo Place development in Quarry Bay and in April Canadian insurer Manulife reportedly signed Hong Kong’s biggest office lease of the year. at the PAG International Trade Tower in Kowloon East.

Despite the competition, Chow is confident that Central remains at the heart of Hong Kong’s business culture, and his company is already adding amenities to ensure that the Asian financial capital’s elite feel pampered in the towers of glass and glass. steel.

Chow notes that Hong Kong Land is already hard at work to ensure that its core portfolio caters to an emerging generation of business leaders in the city.

“The business elite and the need for efficiency at Central haven’t changed much, but we are seeing lifestyle changes and providing a lot of amenities for the new generation of business leaders,” said Chow. “We are changing our real estate portfolio to ensure we capture the next generation of leaders. “

Space with a serving side

As the boundaries between work and life disappear, Hongkong Land has developed new tenant services and new features in its portfolio to satisfy the latest take on Hong Kong’s business elite.

centricity

Hongkong Land introduced Centricity and its social spaces in 2019

After introducing its Centricity suite of online and offline services in 2019 to help tenants access concierge services, book event spaces, or even order lunch, in 2020 the company set out to refresh some of the options. retail in its central properties.

At Jardine House, Hongkong Land introduced a new basement food hall aimed at providing tenants with access to eight food outlets and two bars that can be refreshed alternately.

More new F&B outlets are on the way in 2021, says Chow, and in the longer term, the company is working on continuous upgrades to keep up with its demanding customer base.

Office investment

“One of the things that we are working on is the 5G platform, which we hope to integrate into the whole portfolio,” said Chow. “This opens up huge opportunities for owner integration and interaction with everyone who works in Central.”

Chow sees this technological integration as another element that will maintain Central’s status as Asia’s commercial hub for years to come.

“Elite business leaders from any segment will always be there and if you walk into Central you can do more business there than anywhere else in the world,” he said.

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