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Old February 1st, 2006, 06:39 AM   #1
hkskyline
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2 IFC Rents Skyrocket to Highest in Hong Kong

HK's tallest building gets rent to match
1 February 2006
South China Morning Post



Office rents in Hong Kong's tallest skyscraper, Two International Financial Centre (Two IFC), have been raised to more than $100 per square foot - a fivefold increase on the $20 per sq ft at which the development first came to the market when it opened for business in the first half of 2003.

As befits the highest building in Hong Kong - at 88 floors and 420 metres - the rents remain the highest in the city after the latest adjustment from $93 per sq ft.

Launched at the bottom of Hong Kong's property cycle, the IFC complex, developed by Sun Hung Kai Properties and Henderson Land Development, could find tenants only by charging an effective rental of $20 per sq ft after taking into consideration rent-free periods offered as an inducement.

But the economic recovery since Two IFC's opening has driven Grade-A office rents up more than 120 per cent in the past two years.

Midland Realty assistant sales director Eric Ong Hung-chung believes tenants who got in early now face rent rises of between 140 and 180 per cent when their leases come up for renewal in the middle of this year.

The property agency said IFC's landlord had rented a small unit in One IFC on a high level for $93 per sq ft last month and the asking rental for a 2,000 sq ft unit on the 67th floor was now about $98 per sq ft.

Henderson Land sales department general manager Tony Tse Wai-chuen said asking rentals at Two IFC had now risen to over $100 per sq ft due to the shortage of office space in Central.

The landlord is targeting international financial institutions and finance-related firms as key tenants in Two IFC. Such tenants were difficult to entice during the launch of the complex and the landlord had to subdivide some floor space into smaller units targeting small and medium-sized firms instead.

"But nowadays, most of the tenants in Two IFC are international financial institutions and finance-related companies," said Midland's Mr Ong. "Despite the fact that office rentals have risen over 120 per cent in the last two years, finance-related companies have become willing to pay the higher rentals to stay in Central Grade A office space."

The small and medium-sized firms that had rented small units with lower rental level in 2003 might now be forced out of the building, due to the twofold to threefold rent rises, he added.

Property agents said that six tenants had moved out of One IFC in the past six months because their rentals were raised by between 130 per cent and 140 per cent when their leases came up for renewal. The average rent in One IFC was now $60 to $70 per sq ft, they said.

Alva To Yu-hung, director of consulting and research at DTZ Debenham Tie Leung, said that office rents in Central had increased by more than 120 per cent. According to the company's research, Hong Kong was now the third most expensive business location in the world and the most expensive site for business premises in Asia.

Mr To said the recovery of the economy and the shortage of office supply in Central had driven the rent increases and said he believed that Grade-A office rents in Central would rise a further 15 per cent to 20 per cent this year.
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Old February 1st, 2006, 06:41 AM   #2
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What's can you expect, it's the tallest and one of the most recognizable buildings in HK! It's also in a prime area in Central which is very accessible by MTR and is walking distance from The Star Ferry!
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Old February 1st, 2006, 06:55 AM   #3
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It's not really location that is driving 2 IFC's rents. During the launch period in 2003, SARS decimated the office market, and a lot of the original tenants got in with very low rates. The recent economic boom has raised prices throughout the CBD.
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Old February 1st, 2006, 06:59 AM   #4
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I thought the whole Hongkong Island is a "prime area"...hehe
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Old February 1st, 2006, 08:36 AM   #5
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Quote:
Originally Posted by Chad
I thought the whole Hongkong Island is a "prime area"...hehe
Well, HK Island is one of the prime/most expensive real estates in Asia!
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Old February 2nd, 2006, 07:04 AM   #6
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Rents on the eastern part of Hong Kong Island are substantially cheaper than in the CBD districts of Central, Admiralty, and Wan Chai.
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Old February 2nd, 2006, 07:53 AM   #7
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Quote:
Originally Posted by hkskyline
Rents on the eastern part of Hong Kong Island are substantially cheaper than in the CBD districts of Central, Admiralty, and Wan Chai.
True but how about Causeway Bay?
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Old February 2nd, 2006, 06:23 PM   #8
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Causeway Bay is mostly a retail area, not a primary commercial district. There are some large skyscrapers with commercial space, so they should be somewhere between the CBD and Island East price-wise.
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Old February 3rd, 2006, 08:34 AM   #9
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Quote:
Originally Posted by hkskyline
Causeway Bay is mostly a retail area, not a primary commercial district. There are some large skyscrapers with commercial space, so they should be somewhere between the CBD and Island East price-wise.
True like those of Times Square, Lee Gardens, World Trade Centre and Windsor House. But alot of medical clinics also occupy space in some of these buildings.

BTW, most likely major banks will occupy large spaces in the 2-IFC
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Old February 3rd, 2006, 05:12 PM   #10
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2 IFC was designed for banks because they have higher ceilings to put in all the wires for a trading floor. That's why for the height it only had some 80 stories.
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Old February 13th, 2007, 09:18 AM   #11
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Two IFC secures office rental deal at record HK$150 psf
13 February 2007
South China Morning Post

Two International Financial Centre, the tallest building in Hong Kong and partly owned by Sun Hung Kai Properties, has granted an office rental lease to a global financial firm at a record HK$150 per square foot, sources said.

The sources said the financial institution agreed to pay the rate for a 5,500 square foot unit on the 67th floor of the building for its first office in Asia. The rent represents HK$187 per square foot in terms of net area, which is also a record in Hong Kong.

Office rents in prime districts have been on the rise over the past couple of years as investment banks and fund management and other financial firms expand in the city to handle more deals from the mainland.

Jones Lang LaSalle said the Central office market, which saw some new supply following the completion of York House, was expected to outperform all other districts this year.

"A lot of financial institutions and hedge funds are looking for office space in Hong Kong," said Mark Bernard, an executive director of Knight Frank. "I expect grade A office rentals in core business areas will rise 15 to 20 per cent this year. Office rents will hit HK$180 per square foot in terms of gross floor area this year."

The previous record for office rent was set last month by an investment fund from the United States that leased 5,000 sq ft on the middle zone of Two IFC for HK$140 per square foot in terms of gross floor area.

Mr Bernard said that previously, the highest office rent in Hong Kong was recorded at Exchange Square One, next to the IFC, which charged a Japanese firm HK$128 per square foot in net area in 1994.

Two IFC has become one of the most expensive office buildings in the world.

Simon Wong of CB Richard Ellis said many companies were still willing to pay a high price there because it was "an icon of Hong Kong". It would help boost a company's image, he said.

The IFC Mall holds the record for retail rents in Hong Kong with a 500 sq ft shop leased last week for HK$600 per square foot.

According to CB Richard Ellis, Two IFC is the most expensive office building in Hong Kong with an average rent of HK$138 per square foot in terms of net area. It is followed by One IFC with an average rent of HK$125 per square foot and AIG Tower with HK$112 per square foot.
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Old March 15th, 2007, 06:17 AM   #12
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Hong Kong's IFC gets $2.2 billion loan
By Patricia Kuo
Bloomberg News
Sunday, March 11, 2007

HONG KONG: International Finance Centre, Hong Kong's tallest building, received a 17.35 billion Hong Kong dollar, or $2.2 billion, loan to increase working capital, according to a transaction document obtained by Bloomberg.

IFC Development Corporate Finance will sign the five-year loan with 33 banks on March 12, the document shows. IFC Development runs the prime office and retail complex with views of Victoria Harbor in the Central area.

Demand for office space in the district rose 30 percent last year as financial services companies hired staff to develop Asia private-banking businesses and meet the corporate financing needs of China, according to Colliers International, a property adviser.

Colliers expects rents for Hong Kong's high-quality offices to jump 10 percent and retail space to go up by 8 percent this year.

"Many banks have experienced exponential growth, so demand from financial services has been extremely strong, especially from hedge funds and private equity companies," said Simon Smith, senior director of research and consultancy at Savills Hong Kong.

IFC Development will pay 37 basis points more interest than the Hong Kong interbank offered rate, according to the document. A basis point is 0.01 of a percentage point.

Three-month Hibor, a benchmark for corporate borrowing, was last at 4.19 percent. IFC Development will use the complex's cash flow to repay the debt, the document shows.

The 88-story Two IFC, designed by architect Cesar Pelli, who also masterminded the Petronas Towers, stands 420 meters high, or nearly 1,400 feet, and is the sixth-highest building in the world.

The tower, completed in 2003, counts Bank of America and UBS among its tenants.

The Hong Kong Monetary Authority, the city's de facto central bank, has its headquarters in Two IFC. The complex also includes the 39-story One IFC, which was completed in 1998. The IFC Mall houses more than 200 international brands as well as the premier department store Lane Crawford.

Tenants in Two IFC are paying as much as 150 dollars per square foot per month for the office space, more than sevenfold the 20 dollars they had to pay in 2003, according to Smith.

The complex has 4.7 million square feet of gross floor area, including offices, retail space, car parks, the Four Seasons Hotel and serviced apartments, according to its Web site.

"The market has been extremely tight for prime offices because there has been little new supply in core business districts recently and almost none is forecast for the next few years," Smith said.

Sun Hung Kai Properties, Hong Kong's biggest developer by market value, owns half of the project, with Henderson Land Development and Hong Kong & China Gas holding the remaining 50 percent.

The loan was arranged by Bank of China (Hong Kong), Bank of East Asia, Bank of Tokyo-Mitsubishi UFJ, Calyon, Fortis Bank, HSBC Holdings, Mizuho Corporate Bank and Sumitomo Mitsui Banking.

Other arrangers include BNP Paribas, Citigroup, DBS Group Holdings, Standard Chartered, ABN Amro Holding, Bank of Communications, BayernLB, CCB International Finance, Rabobank Group, Hang Seng Bank and Industrial & Commercial Bank of China (Asia).
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Old April 25th, 2007, 07:39 PM   #13
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國金二期呎租165 全港最高; 中區甲廈得寵 空置率10年新低
18 April 2007
香港經濟日報
(with brief translations of main points)

在中環甲級商廈新供應缺乏下,租金持續向上;當中中區指標商廈國際金融中心2期,更出現一個千餘平方呎單位,以新高呎租逾165元租出的個案。

(new high for rent at 2 IFC - HKD165/sq ft)

國際物業顧問戴德梁行指出,今年首季中環商廈空置率已跌至3.7%,創10年新低,平均實質呎租更躍升至85元歷史新高。

(prices / sq ft in Central have reached a new record high at HKD85)

中環商廈吸納量 料升85%

該行預期,今年中區甲廈租金升幅會達到20%,而中環仍是商廈吸納量最高地區,與去年同期比較,吸納量上升85%至204,000平方呎。新落成寫字樓如約克大廈及皇后大道中100號等,對紓緩中環供應緊絀情況有一定幫助,而目前兩廈出租率達九成。

戴德梁行研究顧問部董事陶汝鴻昨在記者會上表示,盡管中環甲級寫字樓租金高企,但市場求過於供情況仍十分嚴重,僅存可供出租樓面根本不能應負大型的擴充或搬遷需求。而該行再度調高今年中區寫字樓租金升蝠,由原來預測的15%調至20%。

他指今年首季甲級寫字樓需求主要仍由金融、保險、房地產及相關專業服務行業帶動。而股票市場暢旺,更令對○基金及投資銀行對優質寫字樓產生強大需求。與去年同期比較,首季吸納量上升15%,平均實質呎租躍升至85元歷史新高,而國金2期呎租已超過165元。

(this year's Grade A office demand mainly from finance, insurance, real estate and related services companies; strong demand from financial services firms due to a booming market)

甲廈平均呎租85元 創新高

另戴德梁行環球企業服務董事拜仁和表示,中環區空置率已由06年第四季4.5%,下跌至今年第一季之3.7%,創10年新低,而中環區租金與港島東租金差距進一步拉闊58元呎,一些非必要留在中環的用戶更外遷至非核心區。

(Central vacancy rate in Q4 2006 at 4.5%, dropping to 3.7% in Q1, a 10-year-low)

此外,中原 (工商舖) 商業部指出,隨愈來愈多內地優質企業來港上巿,需在港尋覓辦事處,今年香港區商廈平均呎租會有10%至20%上升空間,而港島區商廈整體買賣價,中原黃瑋琮預計全年將有2至3成升幅。

至於九龍區商廈表現,由07至09年,九龍東將有不少商廈新供應,由於大部分新落成商廈招租期相若,短期內將會對東九龍區商廈租金造成一定壓力

另中原鄭琪俊指,中環結志街11至13號地下A號舖,剛獲買家以約1,360萬元購入,該舖面積約800平方呎。
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Old April 27th, 2007, 01:37 PM   #14
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It is not the tallest building of Asia but for office rents ,it is always the highest.
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Old May 29th, 2007, 11:58 AM   #15
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Office rents in HK Central are a bit over the roof right now with so little new supply coming out.
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Old January 14th, 2008, 07:12 PM   #16
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Financial Times forsakes view to save on soaring IFC rents
8 November 2007
South China Morning Post

The Financial Times is moving out, over and up.

Next month, the FT will say goodbye to the splendid harbour view from the 29th floor of Two International Finance Centre as the pink paper's Asia headquarters relocates two blocks west and 30 stories up - to the 59th floor of The Centre - a week before Christmas.

The venerable British daily's cushy waterfront digs were always borrowed space on borrowed time. When the paper expanded to launch its Asia edition during a Sars-plagued 2003, it managed to bargain down rent at the newly opened IFC II to as low as HK$30 per square foot. But over the past four years, rents at the tower have skyrocketed to top HK$160 per square foot.

Moving two streets away is one small step for the newspaper and one giant leap for its bean counters. Property agents reckon gross rents at Cheung Kong's The Centre are about HK$40 per square foot which isn't bad for Central (even though it's closer to Sheung Wan).

With rents in the core financial district continuing to climb, it appears only the richest of media companies will be able to hang on. Perhaps it is only a coincidence but tycoon Li Ka-shing appears to be the only developer offering news organisations shelter from certain banishment to Island East (home to this newspaper, Reuters, Ming Pao, the Hong Kong Economic Times and the Hong Kong Economic Journal) or Kowloon.

Unless you work at Bloomberg, which remains ensconced in the swanky setting of Mr Li's Cheung Kong Centre, the slog to the FCC after work just keeps getting longer.
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Old January 15th, 2008, 04:41 AM   #17
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Wow huge rental price difference per sq. ft between the Center and 2IFC! FT is saving 4x the cost. Rather shocking that IFC would charge that much of a premium over neighbouring buildings.
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Old January 16th, 2008, 05:02 AM   #18
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Quote:
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Wow huge rental price difference per sq. ft between the Center and 2IFC! FT is saving 4x the cost. Rather shocking that IFC would charge that much of a premium over neighbouring buildings.
The same thing is now happening at ICC, where rents are at around HKD$35+ per square foot, but this development is on par with IFC though, while The Centre is a bit out of the way from Central.
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Old December 18th, 2010, 09:48 AM   #19
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Soaring Hong Kong Rents Prompt Allianz, Accounting Firms to Shift Towers
By Kelvin Wong and Bei Hu - Dec 15, 2010
Bloomberg

Surging office rents in Hong Kong are prompting firms including Allianz Global Investors to shift out of the city’s most expensive towers as competition for prime space heats up along with the region’s growth.

Prime office rents in the Central business district soared 34 percent in the six months ended September from a year earlier, the biggest gain worldwide, according to property broker CB Richard Ellis Group Inc. Office rents in the area may climb as much as 30 percent next year, said Gavin Morgan, head of markets at Jones Lang LaSalle Inc.

Top-tier buildings such as Cheung Kong Center and International Finance Centre have raised rents as banks including HSBC Holdings Plc and Barclays Plc expand after the financial crisis. The city now has the world’s most expensive occupancy costs after London’s West End. Shares of Hong Kong landlords have outperformed the main property index on the city’s stock exchange this year.

Tenants in Central “are reassessing whether it’s still within their budget to stay in the district,” said Simon Lo, Hong Kong-based director of research and advisory at Colliers International. Some tenants such as professional services or consulting firms “have a much lower threshold for rents,” he said.

Moving Out

Cheung Kong Center, the 12-year-old office building owned by Li Ka-shing, Hong Kong’s richest man, may see as many as five tenants move out by the end of 2011, according to people with knowledge of the matter.

The IFC towers I and II, both owned by Sun Hung Kai Properties Ltd. and Henderson Land Development Co., are seeing at least three tenants depart this year and next.

Hongkong Land Holdings Ltd.’s Exchange Square complex will lose another tenant to Sun Hung Kai’s International Commerce Centre in West Kowloon, across Victoria Harbour, following moves by Morgan Stanley and Credit Suisse Group AG.

Allianz Global, the investment unit of Allianz SE, Europe’s largest insurer, which occupies about 20,500 square feet in Cheung Kong Center, will shift to nearby Citibank Plaza, according to three people with knowledge of the matter. McKinsey & Co. is also looking at moving, according to two people.

Patience Chan, a spokeswoman for Allianz in Hong Kong, declined to comment, as did Glenn Leibowitz, a Shanghai-based McKinsey spokesman. Laura Cheung, a spokeswoman for Hutchison Whampoa Ltd., which owns and operates Cheung Kong Center, declined to comment on its tenants. Hutchison is 49.9 percent- owned by Li’s developer Cheung Kong (Holdings) Ltd.

Attracting New Tenants

PricewaterhouseCoopers LLP, whose current lease for its 85,000 square feet of space expires in November 2011, is in discussion with Cheung Kong Center’s building management about a possible renewal, Joanne Oswin, a Hong Kong-based operation partner at the accounting firm, said in an interview.

Even with such departures, Cheung Kong Center won’t have problems attracting new tenants, said John Siu, general manager for southern China at real estate services firm Cushman & Wakefield Ltd. in Hong Kong. Barclays, the U.K.’s third-largest bank, moved into the building earlier this year.

“It is one of the few top-tier office buildings in Hong Kong and many companies believe that being there gives you a sense of prestige and market influence,” said Siu.

Change in Profile

Cheung Kong Center, built on the site of the former Hilton hotel, charges its new tenants between HK$140 ($18) and HK$150 a square foot per month on average, according to Seattle-based Colliers and Cushman & Wakefield of New York. The average rent in Citibank Plaza, owned by Champion REIT, is HK$110 per square foot and in Swire Pacific Ltd.’s Pacific Place in Admiralty district from HK$95 to HK$100, according to Colliers.

“We’re seeing a change in the profile of tenants in Central’s top office buildings,” said Jones Lang LaSalle’s Morgan, who is based in Hong Kong. “Many of the support departments in the big banks or professional firms providing these services to them are moving their operations away to non- core districts.”

Singapore-listed Hongkong Land, the biggest landlord in Central, has jumped 39 percent this year, outpacing the 6 percent gain in the Hang Seng Property Index which tracks Hong Kong’s seven biggest builders that doesn’t include the company.

Swire, Wharf

Swire, which also owns the Taikoo Place office complex in Hong Kong’s Island East district, has gained 34 percent this year, and Wharf Holdings Ltd., owner of the Times Square and Harbour City commercial complexes, climbed 25 percent.

Accounting firm Ernst & Young LLP is moving its entire local operation, now in IFC II and Li’s Hutchison House, to Citic Tower in Admiralty, adjacent to Central, next year, according to spokeswoman Queenie Yuen. The firm has agreed to take up nine floors at the tower, owned and run by Citic Pacific Ltd., an arm of China’s biggest state-owned investment company.

ING Groep NV, the biggest Dutch financial-services company, in October moved its investment management and insurance units to the ICC from IFC I, said spokeswoman Jessie Hsieh. London Stock Exchange Group Plc in July moved its Hong Kong office from IFC II to ICC.

Rents in IFC II, Hong Kong’s second-tallest skyscraper after the ICC, and IFC I, are about HK$140 per square foot, according to Chicago-based Jones Lang LaSalle, the second- largest publicly traded commercial property broker. Rents at ICC are about HK$55 and may rise as much as 30 percent over the next two years, according to property consultant Knight Frank LLP.

More Departures

Simmons & Simmons, a London-based law firm, will move out of its 21,000 square-foot space on the 35th floor of Cheung Kong Center in May for Pacific Place, Paul Li, Simmons & Simmons’s China head, said in a phone interview.

Deutsche Bank AG will complete its relocation to the ICC from Cheung Kong Center this year, said Singapore-based spokesman Mark Bennewith. Bloomberg LP, the parent company of Bloomberg News, is a tenant in Cheung Kong Center.

“The reason why we haven’t heard new tenants moving in yet is because some of the ones that are moving out still have a few months to a year in their contract and landlords won’t normally need to rush to sign up new tenants,” said Cushman & Wakefield’s Siu.

That space will probably be filled by separate small offices of hedge funds or investment banks, he said.

Gateway to China

Occupancy costs, which include rent, taxes and service fees, were $184.21 a square foot a year in Central, compared with $193.69 in London’s West End, according to a report from Los Angeles-based CB Richard Ellis, the world’s largest commercial property broker.

Hong Kong’s government raised this year’s growth forecast to 6.5 percent as the city, a gateway to China, benefits from growth on the mainland.

The jobless rate fell to 4.2 percent for the three months ended Oct. 31, the lowest level in 20 months. The city’s number of financial professionals rose to a record 37,694 by July, eclipsing the previous high reached in November 2008, the Securities and Futures Commission said in August.

PwC, which also has offices at the Edinburgh Tower and Prince’s Building in Central, leased about 100,000 square feet of office space in 2008 at the Manulife Financial Centre in the Kowloon East district. Rents in that district, a 30-minute subway ride from Central, are currently between HK$20 and HK$30 a square foot, said Colliers’ Lo.

Professional services’ firms “are going to be reviewing their cost base as a result of rising rents in Central,” said Rhodri James, Hong Kong-based executive director of office services at CB Richard Ellis. “Some of them will be moving all or part of their operations to more cost-efficient buildings outside the area.”
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Old December 19th, 2010, 06:36 AM   #20
spectre000
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With rents tightening up this much hopefully it will mean some new big office towers (maybe even a supertall).
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