From ‘Bamboo Pit’ to Hong Kong Office Hit
Grade A offices have sprung up in Wong Chuk Hang, presenting another alternative HK commercial district with developments incl. South Island Place and Vertical Square.
Wong Chuk Hang means 'Yellow Bamboo Pit' in Cantonese, but the only bamboo you're likely to see there these days is bamboo scaffolding on one of the many new commercial buildings cropping up around the district.
There is now more than one million square feet of Grade A office space in Wong Chuk Hang and that number is growing as Hong Kong's blue-chip developers revitalise the area with a cluster of commercial towers. Swire Properties, Sino Land and Emporer Group, Sun Hung Kai Properties, Henderson Land, and more, have buildings completed or under development, offering alternatives to Central's sky-high office rents, recently named the most expensive in the world.
Office rents of around HKD 25-34 per square foot (gross) might be the first reason corporates look into the district, but an increasing number of tenants are signing up for the quality of real estate to be found there. Two buildings close to Wong Chuk Hang MTR station—Vertical Square and AXA Southside—are already almost fully leased.
“There are very few new office buildings in Hong Kong’s traditional CBD for occupiers looking to reduce costs and stay close to Central without compromising on quality real estate,” says Gigi Lo, an Associate Director with our Hong Kong Markets team. "The new buildings in Wong Chuk Hang offer high ceilings, raised floors for additional flexibility, and more natural light than many of the towers in traditional CBD areas at a much lower cost."
It can take around six years for a firm to fully amortize fit-out costs associated with relocation; so many companies considering a move to Wong Chuk Hang are in it for the long-term.
"Longer term rental stability is an advantage for occupiers," Lo explains. "Over time, tenants may find that rents in Wong Chuk Hang are less volatile than those in other office sub-markets, particularly nearby Central."
Wong Chuk Hang saw net take up of 146,000 square feet of office space in 2017. The district is proving particularly attractive for large-space users, including insurance firms like AXA and Mayer Brown JSM, and consumer goods companies such as Philip Morris, Valentino and Lane Crawford.
"Regulatory institutions have also moved into the area," says Lo. "The Equal Opportunities Commission and the Independent Insurance Authority have already taken up a total of 80,000 sq. ft. in the district. It's a great fit for these institutions because their employees may need to attend meetings at government headquarters in Admiralty, and Wong Chuk Hang is only two stops away on the MTR South Island Line."
The shortened commute brought about by the opening of Wong Chuk Hang station at the end of 2016 has enhanced the profile of the area among occupiers. It is now only 10 minutes away from the heart of Hong Kong's CBD via MTR. Lo says the reduced travel times mean more multi-nationals and professional services firms are considering moving their back office operations out of Central and into the area.
The improved connectivity has also brought in co-working companies keen to play their part in the evolution of the district. Campfire has tailored its services in Wong Chuk Hang to the fashion industry that's already established in the area, offering a photography and video filming studio, while conferencing facilities are helping to fill a gap in the local market.
So what's next for Wong Chuk Hang? Further commercial expansion, according to Lo.
"There are two new towers coming up—including the long-awaited South Island Place, a joint venture between Swire Properties and China Motor Bus Company, which will complete at the end of 2018, and one other in 2021," she says. "South Island Place in particular has attracted overwhelming interest given the size of its floor plates and the reputation of the developer. With more Grade A office space available, we expect leasing to continue to pick up, especially among occupiers looking to relocate from other older Grade A towers elsewhere on Hong Kong Island."