HK's tallest building sees sharp growth in rents

Sep 16, 2010 - PropertyGuru.com.sg

The International Commerce Centre (ICC), the tallest building in Hong Kong, may see a 20-percent to 30-percent increase in rents over the next two years, exceeding growth in areas outside the Central district, said property brokers.

Morgan Stanley, which signed leases for the ICC located in the Tsim Sha Tsui district in the Kowloon Peninsula nearly three years ago, “have probably saved millions” as monthly rents

Hong Kong’s Central district has the second-highest office space occupancy cost in the world, behind West End of London, according to CB Richard Ellis (CBRE). The city saw a 16-percent increase in prime office rents last year as financial firms like Barclays plc and HSBC Holdings plc have started their expansion amidst an economic recovery.

“The benefits for the banks who moved to ICC are more than just savings in rental,” said Mr. Wong. “They have got more space to expand if there are such needs in the future. In Central there is no space left even if you can afford the high rent.”

Credit Suisse Group AG and Morgan Stanley are among the financial services firms that transferred their headquarters from Central into the ICC in 2007-2008, as rents in the city’s financial and banking hub reached record highs prior to the global credit crisis. Credit Suisse is leasing 12 floors at the 118-storey building, while Morgan Stanley is occupying 16 floors, the banks said.

The building also houses ING Groep NV and Deutsche Bank AG, which has rented 12 floors.

“Many of these banks have signed on for years,” said Gary Fok, director of commercial transaction services in Hong Kong at Cushman & Wakefield Inc. “They'll never disclose the exact terms of their leases, but in hindsight they've gotten themselves some very good deals. Taking into account all the other concessions, they're likely paying under HK$30 a square foot.”

ICC’s rental growth will also surpass that of other areas in the Kowloon Peninsula due to tight supply, said Mr. Wong.

“ICC's growth will be more in line with top buildings in Central,” said Mr. Wong. “Those are its real competitors. There's basically no new supply coming into the area.” there have climbed 83 percent to approximately HK$55 (S$9.5) psf, said Xavier Wong, head and director of research for Greater China at Knight Frank.