Manulife Financial Corp. has agreed to pay the second-highest price on record for a whole Hong Kong office tower as companies seeking cheaper rents push up demand for space outside the city’s Central business district.
Canada’s biggest insurer will pay HK$4.5 billion ($580 million) to the developer, a unit of Wheelock & Co., for the 512,000-square-foot Kowloon East building, the companies said in a joint statement yesterday. The building is scheduled for completion by the end of 2015 and will be used by Manulife as its Hong Kong headquarters, they said.
Demand for office space outside Central, which has the world’s second-highest office occupancy cost behind London’s West End, is rising as banks and brokerages seek cheaper locations to keep costs low amid slowing corporate finance activities. Monthly rents in Kowloon East rose 4.5 percent in the first three months of 2013 from the previous quarter to HK$31.71 a square foot, as those in Central gained 0.3 percent to HK$98.77 a square foot, according to broker Cushman & Wakefield Inc.
The price paid by Manulife, equivalent to about HK$8,790 a square foot, is the second-highest in Hong Kong for whole office building sale, according to Sigrid Zialcita, managing director for Asia research at Cushman & Wakefield. Agricultural Bank of China Ltd. last year paid HK$4.9 billion for 50 Connaught Road, near Central.
Shares of Wheelock rose as much as 1.9 percent and were trading at HK$42.20 at 9:54 a.m. in Hong Kong. The stock has risen 8.2 percent this year, compared with the 2 percent decline in the benchmark Hang Seng Index. Manulife’s shares traded in Hong Kong rose 2.8 percent to HK$111.80, bringing its gain this year to 8.1 percent.
JPMorgan Chase & Co. and Bank of America Corp. are among banks that have leased additional office space in areas outside of Central in the first quarter, according to Cushman & Wakefield.
Manulife isn’t the first financial services company to acquire its own building in Kowloon East, where rents are rising. China Construction Bank Corp. in March last year paid HK$2.5 billion, or about HK$7,200 a square foot, for an office building in the area.
The insurer is buying one of the two towers of the One Bay East commercial complex. Wheelock bought the site for HK$3.53 billion, or HK$3,856 per buildable square foot, in a tender in 2011. The developer, Wheelock Properties Ltd., may sell the second tower in full or by floors when it’s nearing completion, Managing Director Ricky Wong said in yesterday’s statement
Wheelock & Co. is controlled by the family of Peter Woo, who has an estimated net worth of $8 billion, according to the Bloomberg Billionaires Index. The Hong Kong-based company is the parent of Wharf Holdings Ltd., owner of two of Hong Kong’s largest shopping malls and the city’s cable TV operator.
CBRE Group Inc., the world’s biggest commercial realtor, brokered the transaction, according to the statement.