Office tenants are tiptoeing back to Hong Kong’s Central district, picking up choice commercial real estate space in what used to be the world’s costliest urban centre as the city wins the battle to put the latest wave of pandemic under control.
White & Case, a New York-headquartered law firm with 45 offices across 31 markets, opened a 25,000-square foot (2,300 square metres) office across three floors late last month in York House, leased for an undisclosed price at Hongkong Land’s Landmark commercial complex in Central.
The lease marked the law firm’s return as a Hongkong Land tenant, after spending 15 years further down Queen’s Road Central at Central Development Limited’s Central Tower. Before moving to Central Tower in 2007, White & Case occupied 17,000 sq ft of space at Gloucester Tower, one of the three office buildings in the Landmark complex.
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“We are pleased to return to the Hongkong Land Central portfolio as we make room for our expanding team and future growth, [where] we look forward to continuing our focus on excellence and serving our clients as we deepen our expertise and presence in the market,” said Eugene Man, the executive partner at White & Case’s Hong Kong office. “York House will provide our employees and clients with unparalleled access to corporate and market leaders in one of the world’s leading international financial hubs.”
Office rent has plunged by 27 per cent from its peak in late 2021 in Hong Kong, according to Morgan Stanley’s estimate. Prices are likely to remain soft as 4.6 million sq ft of new grade A office supply are likely to be added to Hong Kong this year, the most since 6.8 million sq ft were added in 1998.
Central’s office rental charges, still among the highest in the world, dipped by 0.1 per cent in March from February, according to JLL. Overall office rents across the city fared worse, with a 0.2 per cent drop in the same month.
Still, the return by White & Case as a Landmark tenant was “not a sweetheart deal,” said Hongkong Land’s director Neil Anderson.
“White & Case chose to return to the Hongkong Land Central portfolio to make room for their expanding team and future growth and support their talent retention efforts,” he said. “York House is not a cheaper location. White & Case wanted to improve their workplace environment and saw the move as a flight to quality.”
The vacancy rate in Central dipped to 7.3 per cent in March, compared with 8 per cent in December 2021, according to data provided by JLL. City authorities have begun to gradually relax some of the social-distancing rules that were enforced in January to keep the highly transmissible Omicron variant of Covid-19 in check.
The gradual improvement in the take-up rate of empty offices is sustainable in the coming months as social distancing rules are further relaxed, and more employees return to work from their offices, said Colliers Hong Kong’s executive director of capital markets and investment services Thomas Chak.
“Market momentum and activities are likely to improve in the second half as the government gradually relaxes the social-distancing rules from April 21 onwards,” Chak said. “Transactions will become more active in the second half, given the recovery cycle for the sector has been largely delayed by the Omicron strain of the coronavirus.”
Institutional investors are also likely to be more aggressive as they seek opportunities in Hong Kong, property consultants said.
“In fact, 68 per cent of the first-quarter investment transaction [value] in Hong Kong were by institutional investors,” Chak said. “Most of the key investors [who] have their teams and presence in Hong Kong, [they] may have delayed their site inspection or decision-making process, but with the Omicron wave gradually stabilising, the investment market will become active again.”
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