Dubbed CBD2, Kowloon East is developing as a new business hub for Hong Kong, with major companies already setting up shop there; meanwhile Wong Chuk Hang’s new commercial buildings are providing space with smaller floorplates.
The only topic in Hong Kong real estate hotter than apartment prices is the ongoing shortage of office space.
The great space shortage
According to Savills Research & Consultancy’s November 2015 office sector briefing, the vacancy rates for the best (Grade A) office space fell to record lows of 1.9% overall and 1.7% in Central at the end of the third quarter last year. The lack of space has pushed top rents to more than HK$100 per sq ft per month. “Even though demand has moderated, historically low levels of availability continue to support rents,” Simon Smith, head of Asia Pacific research, says.
“Even though demand has moderated, historically low levels of availability continue to support rents”
- Simon Smith
This space shortage has had a twin effect: big businesses find it hard to find large floorplates for headquarters space, particularly on Hong Kong Island, while small and medium sized businesses find office space hard to afford.
The development of Kowloon East and Wong Chuk Hang goes a long way to meet these requirements. The new office districts of Kowloon East, have become known as CBD2 and will become a new business district for Hong Kong, with a number of major office developments planned. Savills reports three major office developments, by Swire Properties, Mapletree Investments and Goldin, which are due for completion by 2016 and 2017, and which will provide more than 2m sq ft of office space. Each building can provide floorplates of 22,000 - 35,000 sq ft - just what major financial services companies are after.
Kowloon East - new hub for multinational corporations?
Major multinationals have taken note and space: Savills estimates that occupiers of 4.4m sq ft of office space have relocated to Kowloon East. A significant move was Citibank buying a 500,000 sq ft office building for its own use in 2013, while other relocating tenants include Standard Chartered Bank, Manulife and Adidas.
Last year, Central provided 23% of Hong Kong’s 76m sq ft of office space, while Kowloon East accounted for 18%, according to Savills data. Once current planned development plans are built out, Kowloon East will provide nearly half (44%) of Hong Kong’s 125.7m sq ft of office space, becoming the dominant district.
Wong Chuk Hang - developing appeal for occupiers
The former industrial district of Wong Chuk Hang near Aberdeen, is in the middle of a building boom, sparked by a new MTR link which is set to open later this year. Henderson Land, Cheung Kong, K Wah Group, Sun Hung Kai Properties and Swire Properties all have current and future developments in the area.
Global Trade Square, developed by Henderson Land and Hip Shing Hong, offers 9,800 sq ft floorplates which can be divided into six units. One Island South, completed in 2012 by Wheelock Properties, was strata sold to a range of owner occupiers. Some of this space is now being let at up to mid HK$20 per sq ft.
It has been suggested that Wong Chuk Hang might become a favoured area for back office operations by occupiers in Central, but Savills notes that both districts are on the same power grid, making Wong Chuk Hang a poor back up. However, as Kowloon East develops as a headquarters location, perhaps Wong Chuk Hang could offer back office space for occupiers across the harbour.
To get started on your property search, take a look at Vertical Square in Wong Chuk Hang or Enterprise Square in Kowloon East. Or, have a look at our full database of commercial properties for in Property Search.