Bank of America Corp. is close to agreeing to lease almost 150,000 square feet of prime office space in Hong Kong billionaire Li Ka-shing’s Cheung Kong Center, as competition among landlords in the city’s Central business district increases with rising vacancy rates.
Under the plan, the Charlotte, North Carolina-based bank will occupy seven floors in Cheung Kong Center, owned by Li’s Hutchison Whampoa Ltd. (13), according to two people familiar with the transaction, who asked not to be identified because the information isn’t public. The current lease of the bank’s Merrill Lynch & Co. unit in Citibank Plaza will expire in September, said one of the people.
Prime office vacancy rates in Central rose to 4.9 percent at the end of November from 3.6 percent a year earlier, according to broker Jones Lang LaSalle Inc. (JLL) PricewaterhouseCoopers LLP last year moved its operations at Cheung Kong Center to other offices, while Deutsche Bank AG in 2010 completed its relocation to the International Commerce Centre in West Kowloon.
“Even with rising vacancies in Central, there aren’t that many choices for tenants looking for such a big space in one building,” said Simon Lo, Hong Kong-based director of research and advisory at property broker Colliers International. “We’re also seeing signs that the drop in vacancies is stabilizing.”
The deal is the biggest by space in Central since at least 2003 when UBS AG signed a 10-year lease with the International Finance Centre II, according to figures from CBRE Group Inc., the world’s biggest commercial realtor by value.
Prime office rents in Central, where Cheung Kong Center is located, have fallen more than 10 percent in the first 11 months of the year as banks cut staff and relocate to cheaper districts in the city, according to Jones Lang LaSalle.
The average rent in Cheung Kong Center is estimated at about HK$105 ($14) to HK$110 per square foot a month, compared with HK$100 in the whole of Central, according to Collier’s Lo.
Tenants in the building include Goldman Sachs Group Inc. and Barclays Plc. Li is Asia’s richest man with a net worth of $27.9 billion, according to the Bloomberg Billionaire Index.
Tiffany Chen, a spokeswoman for Bank of America’s Merrill Lynch unit in Hong Kong, declined to comment on the bank’s relocation plan, as did Laura Cheung, a spokeswoman for Hutchison Whampoa. Amy Wong, a spokeswoman for Champion Real Estate Investment Trust, which owns Citibank Plaza, declined to comment.
Central is the world’s most expensive district to lease office space, with an annual occupancy cost of $248.83 per square foot, CBRE said in a July report.
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