Hong Kong’s Decentralization of Business Districts: Why Major Brands are Moving to Quarry Bay
Central is no longer the only core business district in Hong Kong.
High Rental Prices Driving companies to look outside of Central
Thanks to Hong Kong’s continued growth as Asia’s leading financial hub, the demand for Grade A office space in Hong Kong continues to grow with vacancy rates in the traditional CBD area of Central, hitting a record low of 1.6% in 2018 according to Savills.
This, combined with the influx of Mainland Chinese companies looking to secure prime locations in Central, has drastically driven up rental prices, forcing many companies to look elsewhere for competitively priced, quality office space.
In recent the years, the focus has turned to the East of Hong Kong Island and specifically, Quarry Bay. This former sugar refinery and dockyard has developed into Hong Kong’s secondary core business district attracting both the large multinationals from Central as well as the burgeoning SME’s that are a product of Hong Kong’s ongoing success story.
However, this has not all be down to simple market economics.
“This whole theme of decentralisation in Hong Kong will continue, and follows what other financial centres in the world have experienced.” Don Taylor Director of Swire Properties.
The major driver behind Quarry Bay’s success story is Swire Properties who, since the early 1990s, have developed Taikoo Place into a hub of eight interconnected Grade-A office towers with a total gross floor area of over 5 million square foot.
In 2017, it was announced that Swire would invest HK$15 billion developing two Triple Grade A office towers: One & Two Taikoo Place.
One Taikoo Place: Home to MNC and SMEs
Completed in October 2018, One Taikoo Place (OTP) has been awarded a LEED (Leadership in Energy and Environmental Design) Platinum Certification, adding an additional 1 million square foot to Swire’s existing Taikoo Place portfolio.
Attracting multinational tenants from the financial, legal, insurance, media, luxury brands as well as professional services, OTP has further demonstrated the ongoing decentralisation taking place in Hong Kong.
Companies in OTP
Finance : Royal Bank of Canada
Legal: Baker McKenzie, Eversheds, Simmons & Simmons
Insurance: AXA, Chubb, Metlife
Luxury Retail: Kering Group, Prada
Media: Facebook, IPG McCann
Professional Services: Ernst & Young
In addition to these large multinational tenants, Swire Properties have also chosen Singapore co-working provider The Great Room to occupy an entire floor at OTP. Designed to add both additional amenity space and flexible office solutions to both the multinationals and SME’s looking to gain a foothold in OTP, The Great Room opens in March 2019.
As the largest Landlord in Quarry Bay, Swire Properties have also been able to masterplan the Taikoo Place precinct;, utilising elevated air-conditioned walkways to connect the office towers to Quarry Bay MTR and incorporating 70,000 square foot of landscaped gardens as well as adding a variety of shops and dining spots.
New Central – Wan Chai Bypass Tunnel
The opening of the Hong Kong Government’s HK$36 billion Central – Wan Chai Bypass Tunnel in January 2019 has been another incentive for businesses to move East. This huge infrastructure project has cut the travel time from Quarry Bay to Hong Kong Airport Express Station at IFC to just under 10 minutes by car and 40 minutes to Hong Kong’s International Airport.
Relocation of Government Agencies
Recently, the commercial real estate market has been filled with news that Hong Kong’s financial regulator, Securities and Futures Commission (SFC), will relocate to One Island East, signing an 8 year lease commencing January 2020.
This has not come as a surprise to many observers who feel that this represents the SFC’s desire to save on its rent roll in Central and that the move will further encourage other businesses in the financial and professional services industry to decentralise.