Hong Kong is an international financial centre with a well-established economy and legal system. The territory’s continued economic prosperity depends very much on its success in maintaining this status. To keep a competitive edge, Hong Kong must ensure a steady and adequate supply of Grade A offices and continue to develop new high-grade office clusters through land use planning, urban design, area improvement and the provision of better transport networks.
Although constantly striving for improvement in these areas, Hong Kong’s traditional Central Business District (CBD) can no longer satisfy the growing demand for office space. In particular, larger occupiers who are looking to consolidate operations in one location now find it challenging to secure sufficient space at the right price. Occupiers are also forever seeking more cost-efficient space and certain occupiers are looking for creative alternatives to satisfy their space requirements.
All this translates into increasing demand for office space in decentralised areas, where availability is normally higher and rents are more affordable. Occupiers are considering decentralised locations such as Kowloon East as solutions to their space challenges.
Hong Kong’s CBD2
Kowloon East is an area comprising the Kai Tak metropolis, Kwun Tong and Kowloon Bay business districts in Hong Kong. The government of the Hong Kong Special Administrative Region has adopted a visionary, coordinated and integrated approach to facilitate the transformation of this area into a commercial hub, with the expedition of the Energizing Kowloon East initiative, intended to fast track development.
Kowloon East has been growing steadily in importance as a CBD2 for Hong Kong
Wheelock Properties is a forward-thinking developer and a pioneer in initiating development in, and adding value to, non-traditional but upcoming commercial areas. In support of the government’s initiative, Wheelock Properties continues to invest in Kowloon East, showing a commitment to building a new commercial hub for the territory – one that is energised by well-planned infrastructure and community development and has a critical role in enhancing Hong Kong’s position as an international financial and commercial centre.
Since its birth, Kowloon East has been growing steadily in importance as a CBD2 for Hong Kong. It is likely the territory will see a further increase in occupier attention over the course of this year. This is, in part, due to the fact the right kind of space is available in the area for growing numbers of multinational corporations that want to consolidate their business and need to find an area in which to do so.
Part of this growing interest in Kowloon East is due to Wheelock’s en bloc sales strategy, which supports large corporations’ strategic space planning and enables them to consolidate staff into one building, enhancing operational efficiency.
Wheelock Properties sold the East Tower, One Bay East to Citi in a landmark, $70m deal, in June 2014. The deal marked the biggest en bloc office transaction in Hong Kong’s history. The deal was the second en bloc tower transaction at One Bay East, following the acquisition of the West Tower by Manulife (International) in April 2013. The acquisitions of Citi and Manulife (International) combined totalled $1.2bn. Both deals were advised by the world’s largest commercial real estate services and investment firm, CBRE Group.
An overview of One Bay East
Located at 83 Hoi Bun Road, Kwun Tong, One Bay East is a Grade A, waterfront, twin tower office development. Both towers stand 21 stories tall and total 512,000 sq. ft. each. The development has efficient office space and panoramic sea views over the new cruise terminal and the future Kai Tak metropolis. With good connectivity, convenience and state-of-the-art provisions and specifications, it is the epicentre of Kowloon East’s commercial hub.
Wheelock Properties has a proven track record in Grade A office development, and continuously delivers quality developments to meet the high standards of multinational institutions. Firms such as Citi and Manulife have very stringent requirements when selecting premises, and their acquisitions of towers at One Bay East illustrate their commitment to the Hong Kong property market, and to Kowloon East.
For Citi, which has a long history of making significant investments in Asia Pacific, the decision to purchase the East Tower, One Bay East, underlines a belief and confidence in Hong Kong’s continued growth as a leading global financial centre and hub for its core regional business.
Citi’s acquisition was the culmination of a longstanding relationship between CBRE, Wheelock Properties and Citi in Asia Pacific. It is an example of strong collaboration between three parties that have worked together to create a business case, understand market dynamics and move a deal to completion.
The group strives to develop sustainable developments in its master planning, detail design and landscaping
The deal
CBRE was appointed by Citi to advise on the financial institution’s future footprint in Hong Kong. CBRE saw limited options in the market and a small window of opportunity to execute a deal that would coincide with Citi’s lease expiries in 2016 and 2017. Citi and the CBRE team decided to investigate the purchase of a property, instead of leasing new space.
In April 2014, the East Tower, One Bay East was identified as the ideal property for Citi’s future home in Hong Kong. Citi embarked on a complex consolidation, relocation and purchase in which it would relocate all four of its Hong Kong Island offices to Kowloon. It submitted an offer to Wheelock Properties and, by mid-June, the deal was done.
The consolidation of Citi’s offices into East Tower, One Bay East will enable the company to implement an activity-based workplace strategy, significantly reduce its occupancy footprint and its annual operating costs. A strategic investment, Citi’s ownership of this asset in Hong Kong’s CBD2 will insulate the financial institution from Hong Kong’s volatile rental market. The building will be handed over to Citi in Q4 2015 for interior fit-out, with the first occupants due to move in during Q2 2016.
Future development in Hong Kong
Wheelock currently has more than 1.2 million sq. ft. of waterfront office portfolio under development in Hong Kong, to meet increasing office demand. This includes One HarbourGate at Victoria harbour cluster (680,000 sq. ft.) and the redevelopment of Wharf T & T Square (600,000 sq. ft.) in Kowloon East. One HarbourGate comprises twin, Grade A, office towers and a pair of low-rise retail villas with an open Victoria Harbour view.
The group strives to develop sustainable developments in its master planning, detail design and landscaping. Green provisions and energy-saving devices are provided to reduce power consumption for lights, air conditioning and water, which help operational savings in the long term.
Sky garden or green spaces will be provided in future developments to create a better work and living environment. Wheelock’s design team and landscape consultant take care of landscape design and maintenance to ensure green spaces fit each project. The group also promotes environmental awareness and encourages care for the environment among staff and business partners, while also supporting various green awareness activities. Beyond ensuring its properties meet high environmental standards, Wheelock Properties will continue enhancing the physical spaces and communities in which people live and work in Hong Kong.
