Banking, financial firms exit Hong Kong on back of weak Grade A office market

Predictably, they all flock to Singapore.

Leasing market demand from banking and financial firms continues to shrink, alongside the weakening Grade A office market, as many expatriates left Hong Kong in 2014, compared with 2013.

According to a research note from Savills, a high cost base in terms of commercial and residential premises compared to Singapore is an issue.

The report noted that many fund houses now prefer Singapore over Hong Kong as their Asian headquarters.

Here's more from Savills:

We have seen some demand from high-budget-users, mainly at the managing director level, as well as heads of equity funds.

Other demand drivers include I.T., logistics and the consumer goods sector, who are prepared to pay mid-range rents of HK$30,000 to HK$50,000 per month.

In Kowloon, rents remain solid, with end-user demand driven by local families as well as expatriate tenants.

An increasing number of expatriates are willing to live in traditionally non-expat areas. Accommodation in West Kowloon is particularly popular with such families, and Olympic Station is now an up-and-coming area for expatriates with a low- to mid-budget allowance (HK$20,000 to HK$50,000).

We are also seeing Hong Kong families split their accommodation, with the younger generation choosing Kowloon Tong because they want to remain close to their parents.

Rents in West Kowloon and Homantin/Kowloon Tong rose by 6.1% and 8.5% respectively in 2014.

Looking ahead, we expect that the leasing market has now bottomed out, and luxury apartment rents are
likely to see 0% to 5% growth in 2015.

The persistent vacancies in the townhouse sector are restricting rental rises, and it will take longer for this high-end stock to be taken up.