If you’re a business in Hong Kong, you’re lucky if you are suffering from high rent –because at least you’ve found space for an office! Availability remains extremely low in the city, with an average rate of 2.2 percent across office districts. The limited supply has kept rental prices high, with an overall 2.1 percent rental increase in Q1/2016.
Don’t expect rents to fall sharply with projected supply increases, though, because mainland Chinese companies’ desire for en bloc buildings is still strong. Mainland companies continue to show interest in Grade A office space in high-profile areas, especially in buildings for which they can obtain naming rights.
Major en bloc deals completed by mainland Chinese companies recently include the acquisition of One HarbourGate - West Tower in Hung Hom by China Life Insurance for HK$5.85b; the HK$12.5b purchase of Mass Mutual Tower in Wanchai by the Evergrande Group; and a HK$10b deal for Dah Sing Financial Centre by Everbright Group, also in Wanchai.
This is a trend which has become more pronounced over the last few years. In Central, The Bank of China, China Construction Bank and the Agricultural Bank of China have towers, while the Industrial and Commercial Bank of China (ICBC) has naming rights for ICBC Tower. While most buildings in Central and Admiralty are held by Hong Kong developers, mainland Chinese interest in en-bloc purchase is expected to grow outside the traditional CBD, as evidenced by new deals.
While a number of new single-owner office buildings will open next year, including Lee Garden Three in Causeway Bay, Somerset House in Quarry Bay and Asian House in Wan Chai, mainland Chinese companies will continue to hunt for en bloc buildings in prime locations.