UBS AG (UBSN), Switzerland’s biggest bank, has agreed to extend its lease for almost 205,000 square feet of space at Two International Finance Centre in Hong Kong’s Central business district.
The bank will continue to lease the eight floors it currently occupies in the city’s second-tallest tower until 2019 at an average monthly rent of about HK$106 ($13.70) a square foot, said two people familiar with knowledge of the deal, who asked not to be identified because the information isn’t public. Fiona Chan, a UBS spokeswoman in Hong Kong, confirmed the bank has extended the lease, declining to comment on the details.
Average rental prices in Central, the world’s most expensive place to lease office space, fell about 12 percent last year as banks cut staff and sought cheaper locations on slowing corporate finance activities. Space in buildings with large floor plans of more than 20,000 square feet, a feature favored by global investment banks, is in short supply in the city, property brokers, including CBRE Group Inc., have said.
“It shows that even with all the bad news and talks of cost cutting, a lot of existing tenants in the district just can’t leave,” said Simon Lo, director of research and advisory at property broker Colliers International. “This should be a good news for the landlords.”
The average rent for prime offices in Central was about HK$98.80 a square foot a month at the end of the third quarter, according to Colliers.
UBS moved into Two IFC in 2004 when the city was recovering from the recession brought on by the 1997 real estate crash and the 2003 Severe Acute Respiratory Syndrome outbreak. The bank’s current lease expires in July 2014. The bank has been paying somewhere in the “HK$30s” for most of the space, one of the people said, declining to give the exact rental figure.
The Two IFC complex is co-owned by companies including Sun Hung Kai Properties Ltd. (16), Henderson Land Development Co. and MTR (66) Corp. Mandy Kong, a spokeswoman for MTR, the city’s subway operator which owns the space occupied by UBS, declined to comment.
Global financial services firms, including UBS, Bank of America Corp., Morgan Stanley and Goldman Sachs Group Inc., have announced a total of more than 300,000 job cuts worldwide since the start of 2011, according to data compiled by Bloomberg.
Morgan Stanley plans to trim about 15 percent of its investment banking positions in Asia as it starts a round of job cuts this week, two people with knowledge of the matter said in a story published today.
Rents in Central are set to continue declining in the first half of 2013, brokers including Los Angeles-based CBRE and Jones Lang LaSalle Inc. of Chicago have said. Some Central landlords have in the past year lowered asking rents by as much as 30 percent to attract tenants, according to Savills Plc, located in London.
Bank of America was 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 in Central, two people familiar with the transaction said last month. The deal, brokered by CBRE, would be the biggest by space in the district since at least 2003.
Central’s grade-A vacancy rate rose to 5.5 percent in the third quarter from 3.5 percent a year earlier, according to Seattle-based Colliers.
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