Soaring rents in Hong Kong prompt firms to move out property
Surging office rents in Hong Kong are prompting firms including Allianz Global Investors to shift out of the city's most expensive towers as competition for prime space heats up along with the region's growth.
Prime office rents in the Central business district soared 34pc in the six months ended September from a year earlier, the biggest gain worldwide, according to property broker CB Richard Ellis Group.
Office rents in the area may climb as much as 30pc next year, said Gavin Morgan, head of markets at Jones Lang LaSalle.
Top-tier buildings such as Cheung Kong Centre and International Finance Centre (IFC) have raised rents as banks including HSBC Holdings and Barclays expand after the financial crisis.
The city has the world's most expensive occupancy costs after London's West End.
Shares of Hong Kong landlords have outperformed the main property index on the city's stock exchange this year.
Tenants in Central "are reassessing whether it's still within their budget to stay in the district", said Simon Lo, Hong Kong-based director of research and advisory at Colliers International.
Some tenants such as professional services or consulting firms "have a much lower threshold for rents", he said.
Cheung Kong Centre, the 12-year-old office building owned by Li Ka-shing, Hong Kong's richest man, may see as many as five tenants move out by the end of 2011, according to people with knowledge of the matter.
The IFC towers I and II, both owned by Sun Hung Kai Properties and Henderson Land Development, are seeing at least three tenants depart this year and next.
Hongkong Land Holdings' Exchange Square complex will lose another tenant following moves by Morgan Stanley and Credit Suisse Group.
Allianz Global, the investment unit of Allianz, Europe's largest insurer, which occupies about 20,500 square feet in Cheung Kong Centre, will shift to nearby Citibank Plaza, according to three people with knowledge of the matter.
Cheung Kong Centre, built on the site of the former Hilton hotel, charges its new tenants between HK$140 (€13.50) and HK$150 a square foot per month on average, according to Colliers and Cushman & Wakefield.
Occupancy costs, which include rent, taxes and service fees, were $184.21 a square foot a year in Central, compared with $193.69 in London's West End, according to a report from CB Richard Ellis.