Hong Kong East: from decentralised to coreNovember 8, 2018 / By
The Hong Kong East Grade A office market, consisting of Fortress Hill, North Point and Quarry Bay on the eastern side of Hong Kong Island, has undergone tremendous transformation over the past few decades from an industrial enclave to a modern business hub. Spearheaded by the expansion of Swire Properties’ Taikoo Place office portfolio, total Grade A office stock in Hong Kong East stands at 10.8 million sq ft, comparable in size to Tsimshatsui, the most prominent office market on the Kowloon peninsula. In the coming years, the market is set to grow even bigger with two more Grade A office buildings under development, namely New World Development’s K11 Atelier King’s Road and Swire Properties’ Two Taikoo Place, currently under construction. By 2021, total Grade A office stock is expected to reach 12 million sq ft. Supported by the completion of new high-quality office premises, Hong Kong East is gaining momentum to become the next core office market on Hong Kong Island alongside Central and Wanchai/Causeway Bay.
As office rents in Central have skyrocketed, tenants have been driven to find cheaper accommodation. Hong Kong East is emerging as a prime location for these tenants, with monthly rents being anywhere from HKD50-90 per sq ft lower for offices with similar quality and ambience. The savings and high quality office space on offer has attracted more multinational corporations consider moving their workforce to Hong Kong East. This has translated into a whopping 970,200 sq ft of net take-up in the first three quarters of 2018, supported largely by 100% pre-commitment in the newly completed One Taikoo Place, the latest addition to the Taikoo Place portfolio.
Ongoing decentralisation has also seen the tenant base in Hong Kong East slowly become more aligned with the traditional CBD with a higher number of finance, insurance, real estate and business services (FIREBS) tenants now calling it home. Today, the FIREBS sector accounts for about 37% of the tenant base in Hong Kong East, which is the largest among all industry sectors. In addition, the technology sector is also gaining a foothold whereas the legal sector is a recent addition as it continues to decamp from Central. In the past, Hong Kong East was viewed by most multinational companies as a back office location. Increasingly, however, we are now seeing more companies moving or establishing their head office in Hong Kong East with recent notable examples including EY and Baker McKenzie.
Figure 1: Tenant profile in Hong Kong East
With the Central-Wanchai Bypass set open in late 2018 or early 2019, the travelling time between Central and Hong Kong East will be reduced to less than 10 minutes. The enhanced connectivity will further add to Hong Kong East’s appeal and will very likely drive another round of tenants to decentralise into the market. Compared with other popular decentralised office areas, namely Kowloon East and Wong Chuk Hang, Hong Kong East gains a competitive edge for greater accessibility, presence of amenities and a more concentrated office cluster. While the government continues to push for the development and marketing of Kowloon East as the city’s second CBD, the organic developments in Hong Kong East have effectively evolved the decentralised office area into a new core business district.
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