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Sandy Li

Summer Zhen

The sale of The Center in Central for a record HK$40.2 billion (US$5.15 billion) has given Hong Kong’s office leasing and sales market a shot in the arm, but the flip side of the momentum will spur prices to surge further in the world’s most expensive city to rent an office.
Market observers also believe the deal would lead to the closure of more big-ticket transactions in the coming months.
“Taking the positive atmosphere, landlords in Central will certainly revise rents upwards once the leases are due for renewal. Tenants in Central are bound to face rental increases,” said Victor Lai Kin-fai, the chief executive of Centaline Professionals.
“Companies will consider relocating to cheaper alternatives if the increases were beyond their affordability.”
Even Centaline may not be spared.
“We are also concerned about the potential rent increase,” said Louis Chan Wing-kit, vice-chairman of Asia-Pacific at Centaline Property Agency, which owns Centaline Professionals.




“But it’s not necessary for Centaline to stay in Central if rents shot up unreasonably, as it is only our backup office.”
The agent, one of Hong Kong’s two largest property agents, has leased four floors, or 60,000 square feet of offices to accommodate 500 staff at New World Tower in Central, a stone’s throw away from The Center, for the past 30 years.
Chan said their monthly rent had reached HK$3.6 million, or HK$60 per square foot when the lease was renewed last year.
“The latest rate was a 200 per cent jump from the HK$20 per sq ft rate that we first started with for the same building three decades ago,” he said.
Hong Kong is already the world’s most expensive city to rent an office and own a home with soaring property prices showing no sign of abating despite a series of government market cooling measures.
Average monthly rent for grade A offices in the prime Central district in October stood at HK$71.30 per sq ft, said JLL.
But it’s not necessary for Centaline to stay in Central if rents shot up unreasonably, as it is only our backup office
Louis Chan Wing-kit, Centaline Property Agency
Last week, CK Asset Holdings, owned by Hong Kong’s wealthiest tycoon Li Ka-shing, sold its 75 per cent stake in The Centre to C.H.M.T Peaceful Development Asia Property, a consortium that is 45 per cent owned by Hong Kong businessmen and 55 per cent owned by Beijing-based China Energy Reserve and Chemicals Group. The stake represented 1.22 million sq ft of floor space and went for HK$33,000 per sq ft.
Property agents have begun testing market sentiments by offering part of the office spaces for as much as HK$50,000 per sq ft, amid speculation that the Hong Kong businessmen would seek to resell their 45 per cent stake once the deal is completed in six months. With enough interest in the projected premium, the agents could use it to convince the would-be owners to sell.
Two days after The Center’s sale was announced, agents said an unknown firm paid HK$200 per sq ft a month to rent a 2,900 sq ft office unit in Two International Finance Centre, Hong Kong tallest building. The price was just HK$10 short of the HK$210 per sq ft when rents for the building peaked in 2008, but 25 per cent higher than the previous lease of HK$160 per sq ft, they said.
For Edwin Lee, founder and chief executive of a retail property fund Bridgeway, whether rents rise significantly or not, the firm would maintain its office in Central.
“Central is Central, and it will raise our profile in the financial market,” he said.
The firm’s monthly rent for a 1,000 sq ft office in New World Tower was about HK$100,000, or HK$100 per sq ft.
“Even it tripled to HK$300,000 a month, we can still afford it,” Lee said, adding that they would only rent and not buy office space.
Others said they would prefer to buy if the opportunity arises.
An executive at a mainland company that leased upper floor office spaces in The Centre said the landlord had raised the monthly rent by 30 per cent to over HK$100 per sq ft over the two years they had been in the building.
“We would rather buy the office spaces at The Center if the price is reasonable,” said the executive.
But he expects rent increases to slow with more options becoming available, such as the two recently completed towers of Chinachem Central.
He added that the company had no plans to leave Central because it is “so convenient”.
“Mainland Chinese firms would rather purchase offices in Central than bear the sky-high rents, so the demand for holding high-quality offices in Central is huge,” said Frank Ma, director of PRC office services at Colliers International.
He said this was where they differ in mindset from foreign firms.


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Hong Kong property

Will Hong Kong rents soar higher after The Center’s record sale?

A 75-per cent stake of The Center (centre) was sold last week by CK Asset Holdings to a consortium that comprised of Hong Kong businessmen and a Chinese firm. Photo: Nora Tam

Exterior view of The Center building in Central. 02NOV17 SCMP / Nora Tam

Bridgeway Prime Shop Fund Management founder Edwin Lee, poses for a picture at New World Tower in Central. Bridgeway Prime Shop Fund Management is blazing a new trail in the property market by becoming Hong Kong's first asset management firm and collective investment scheme, focused purely on shops and retail outlet investment. 24NOV16 SCMP/K. Y. Cheng

Li Ka-shing sells The Center in US$5.15 billion record deal to trim his flagship’s Hong Kong assets

The buyer is a consortium of Hong Kong investors and Chinese buyers led by Beijing-based China Energy Reserve & Chemicals Group

Central offices building, the Centre. Hong Kong. 25JUL16

Chairman of CK Hutchison Li Ka-shing attends Li Ka-shing Foundation-Shantou University Ocean Rowing Team Completes Challenge at Whampoa Promenade Private pier in Hung Hom. 19FEB17 SCMP/ Dickson Lee

At 73 storeys, The Center is the tallest building in Li Ka-shing’s property portfolio, and the fifth tallest tower in Hong Kong. Photo: Martin Chan

Cheung Kong puts The Center up for sale as Li Ka-shing trims Hong Kong assets

The Center’s iconic lobby was featured in the Hollywood blockbuster movie The Dark Knight. Photo: Edward Wong

Record HK$40.2 billion paid for The Center is ‘reasonable’, Hong Kong investor says

The Center at 99 Queen's Road Central. Photo: Nora Tam

This image show a headshot of Ma Kiu-sang, eldest of three sons of Ma Ah-muk, minibus tycoon who runs one of the biggest green franchised minibus companies in Hong Kong. 30APR16 SCMP/Edward Wong [16JUNE2016 FEATURES LIFE]

Rumoured HK$40 billion sale of The Center could make it Hong Kong’s most expensive building ever

At 73 storeys, The Center (left) is the tallest commercial building owned by Li Ka-shing’s flagship property company CK Asset, and the city’s fifth-tallest building. Photo: Martin Chan, SCMP

Mainland Chinese financial firms drive Hong Kong office rents

Mainland Chinese financial firms are expected to fuel a rise in office rents in Hong Kong this year. Photo: Bloomberg

Property

Hong Kong & China

Business

Companies

Some tenants say they could relocate if rents surge further while others will stay on as Central bodes reputation and convenience


Cheung Kong

Office rental