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Hong Kong Hedge Fund Real Estate Update: Is Central Still Hedge Fund Heaven?

By Kulvinder Gill,
Thursday, September 19th, 2013

In the past on Hedge IT, we have focused on the real estate markets in both the US and UK. Today, we move across the pond and provide an update on Hong Kong.

Asia has experienced unprecedented growth in its hedge fund industry, especially Hong Kong, despite difficulties in recent global financial markets. However, office space in
Hong Kong is still undeniably the most expensive in the world.Hong Kong Real Estate

Hong Kong’s Central District is a bustling location with gleaming skyscrapers and is home to about 90% of Hong Kong hedge fund offices.  According to CBRE Global Research and Consulting’s 2013 Prime Office Occupancy Costs survey, the Central District’s overall occupancy costs of US$235.23 per sq. ft. per year topped the list as most expensive for the third consecutive time.  London’s West End followed with total occupancy costs of US$222.58, and New York’s Midtown Manhattan ranked 10th on the list with occupancy costs of US$120.65.

Hong Kong is the only city in the world where the total real estate costs for renting office space are higher than £1 million a year. Coming in at £1,074,000 a year, this figure is three times higher than up-and-coming cities.

So, is there another location hedge funds are considering?

Locations such as Victoria Harbor, Kowloon and Sheung Wan are set to be favourites amongst managers and prime brokers due to their lower real estate costs.  In fact, these areas have already attracted some big names in the hedge fund space.  The Hong Kong government is trying to develop the area of Kowloon East into a commercial district, and some financial services firms have already started moving their support functions to Kowloon East.

However, as the CBRE survey says, "Hong Kong Central’s position as the most expensive office market continues to be bolstered by its status as a leading global financial center. Although financial institutions have become more cost sensitive, with some considering relocating to less expensive space outside the CBD, high-quality and premium space is still sought after, especially by mainland Chinese firms which are increasingly setting up their offices in Hong Kong (Central) in prestigious buildings."

Only time will tell if Central will maintain its stronghold or if hedge funds will be attracted to less expensive space outside Central.

The Top 10 List

If you are curious, here is CBRE's top 10 most expensive list (in US$ per sq. ft. per annum):

Rank

​Market

​Occ. Cost

1

2

3

4

5

6

7

8

9

10

Hong Kong (Central), Hong Kong

London - Central (West End), United Kingdom

Beijing (Finance Street), China

Beijing (CBD), China

New Delhi (Connaught Place - CBD), India

Hong Kong (West Kowloon), Hong Kong

Moscow, Russian Federation

Tokyo (Marunouchi/Otemachi), Japan

London - Central (City), United Kingdom

New York (Midtown Manhattan), U.S.

235.23

222.58

195.07

187.06

178.96

173.90

165.05

161.16

132.94

120.65​

Additional Resources

Categorized under: Real Estate 



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