Mainland financial heavyweight China Merchants Bank has leased a four floor office in Hong Kong’s Three Exchange Square in Central, taking half of the eight floors shed by liquidity-troubled HNA last week, local media reported.
The Shenzhen-based commercial bank, which has over five hundred branches in mainland China and Hong Kong, has been expanding aggressively in the Asian financial hub with this new 40,000-square-foot (3,716-square-metre) space marking its third office site in Hong Kong Land’s prime waterfront complex.
The offices secured by the parent of Hong Kong’s Wing Lung Bank had belonged to mainland aviation-to-finance conglomerate HNA for the past 14 months, as part of an eight floor lease that the company signed in June of 2016.
China Merchants Takes Third Site in Exchange Square
The 44,000 square foot office space will cost China Merchants Bank around HK$160 per square foot, adding another HK$7 million ($892,000) to the rent checks it will be writing to Hongkong Land each month.
China Merchants Bank was earlier reported to have rented the 46th and 48th floors of One Exchange Square, just next door to its newly-leased space, but has since given up the 46th floor. In 2014, the bank leased the 45th floor, covering around 13,000 square feet, in the same building. Media reports at that time pointed out that the bank was renting the HK$130 per square foot office to accommodate its securities department.
HNA had announced last week that it would give up its unused prime space in Three Exchange Square, to escape the HK$12 million per month rental burden. The company had originally agreed to occupy the prime accommodations for 10 years, starting from January 2017.
After pressure from a debt pile said to reach as much as $100 billion led HNA to begin defaulting on credit obligations this year, the mainland conglomerate had reportedly begun negotiating with Hongkong land in June of this year to surrender half of its leased premises in Exchange Square, before it finally decided to surrender the total space last week.
Mainland Firms Dominate Prime Central
Three Exchange Square is the third phase of the Hong Kong Land’s Exchange Square complex located in Central, next to the International Finance Centre, the second tallest building in the city. According to Reed Hatcher, head of research at Cushman & Wakefield, the average rent at Three Exchange Square was HK$151.3 per square foot per month, 10.4 percent higher than the rent in Greater Central area of HK$137 per square foot per month.
The building is home to the offices of the Hong Kong Stock Exchange as well as housing international banking and law firms such as Bank of Montreal, Lloyd George Management and Ropes & Gray.
China Merchants Bank’s lease follows less than one year after another Chinese financial institution Ping An, agreed to pay HK$160 per square foot per month for its new home in a high floor of Three Exchange Square in October last year.
In recent years, mainland Chinese financial firms have become dominant tenants of prime offices in Hong Kong’s Central district as tighter vacancy levels and rising rents drive even some of the most prestigious multinationals from the city’s traditional business hub.
According to Hatcher, mainland Chinese firms occupied 21 percent of the Grade A office space in Greater Central as of Q2 2018, up from 14 percent in mid-2013. “Over the past five years, PRC firms’ share of office space in Central has steadily increased, and with the ongoing trend of PRC firms replacing multinationals relocating out of the district, we see this continuing,” said Hatcher.
Merchants Bank Expands Hong Kong Presence
China Merchants Bank has been expanding quickly in Hong Kong since it acquired 100 percent of Wing Lung in 2009. According to the bank’s website, its Hong Kong branch mainly has three business areas, conducting retail banking, corporate banking and securities trading.
Re-disseminated by The Asian Banker from Mingtiandi