What’s the new hotspot for tech and finance companies in Hong Kong? Causeway Bay. That might sound surprising to anyone who still thinks of the neighbourhood as a shopping mecca, but things are changing fast.
Newcomers to the buzzing neighbourhood include LinkedIn, which has opened an office in Hysan Place, and Alibaba and JD.com, who have opened in Times Square. On the finance side, National Australia Bank and KPMG have moved to Hysan Place, while ShiFang Holdings has moved into a 14,700 square foot space in Lee Garden One, one of the largest leasing deals so far this year. Causeway Bay’s convenience, late-night amenities and relatively low office rents are proving an attractive combination, especially considering the good value of office space in the area.
Why the change? Insurance companies have traditionally dominated the office scene in Causeway Bay, but they are now moving across the harbour to Kowloon East, which offers lower rents and more space, or Tsim Sha Tsui, where they can be closer to mainland clients on shopping trips. Meanwhile, the decline in mainland tourism and the slowdown in the retail sector has prompted some luxury brands to downsize, freeing up space in what had until recently been their business bastion.
The latest Savills Office Leasing Briefing shows that vacancy remains at extremely low levels across all major business districts, averaging 2.2%. Meanwhile, rental growth in Central was 4.7% and 3.6% in Q4/2015 and Q1/2016, respectively. The emergence of Causeway Bay has proved fortuitous for finance companies looking to avoid the high rents and limited office supply of Central and to tech companies looking for a high-profile location. A word of warning, rental growth in Causeway Bay has outperformed other core districts since 2013, so tenants need to take action sooner rather than later as availability tightens.
Relief is at hand, however, in the form of Hysan’s redevelopment of Sunning Plaza which will be complete in Q3-Q4/2017, when Lee Garden Three opens with 20 floors of Grade A offices – an extra 350,000 square feet in a neighbourhood eager for more space.