Cheaper rents and proximity to the high-speed rail link between Hong Kong and mainland China are likely to boost shopping haven Tsim Sha Tsui’s standing as a preferred location for Chinese technology companies that are looking to go public via the city’s stock exchange, according to analysts.
The forecast comes after Tencent, which has been listed on the local bourse for some years, recently expanded its footprint in Hong Kong by leasing a 10,000 square-foot office space in The Gateway, a building owned by Wharf (Holdings) in the district. It has other offices at Three Pacific Place in Wan Chai and the World Finance Centre, also in Tsim Sha Tsui.
Tencent would be paying HK$6 million (US$770,000) in rent per year for The Gateway space, or HK$55 per square foot, which is about a fifth lower than the HK$70 per sq ft it would have paid for the same space two years ago, agents said.
Get the latest insights and analysis from our Global Impact newsletter on the big stories originating in China.
With popular Chinese short video app Kuaishou Technology having recently listed its shares in Hong Kong, and its competitors such as Bilibili, Duoyin, and iQiyi reportedly eyeing flotations, the city is likely to see these companies lease office space, offering some relief to landlords grappling with high vacancy rates as the economy reels from the impact of the Covid-19 pandemic. Tech firms account for 10 per cent of total tenants in Hong Kong offices, according to Colliers.
“In China, Shenzhen has been a tech hub instead of Hong Kong, but [because of Chinese stock listings], it is believed that more tech firms will set up offices in Hong Kong” said Daniel Wong, CEO of Midland IC&I. “They will locate their offices in different locations, but probably not Central because of the high rent.”
Shenzhen-headquartered Huawei Technologies, one of the world’s largest telecommunications equipment providers, and smartphone maker Xiaomi also have offices in The Gateway in Tsim Sha Tsui.
“Tsim Sha Tsui offers cheaper rental, it has better building quality compared with Hong Kong Island, and is close to the West Kowloon station,” said Fiona Ngan, head of office services, Hong Kong, at Colliers International.
From the high-speed railway’s West Kowloon Station, which is about a seven-minute drive from Tsim Sha Tsui station, it takes about 15 minutes to get to Shenzhen.
The West Kowloon station is the sole station in the city for the Guangzhou–Shenzhen–Hong Kong Express Rail Link, making it more convenient for Chinese tech executives to be based in Tsim Sha Tsui where they can get to the station quickly.
Lower rents appear to be the other big draw for a district more popularly known as a retail haven bustling with mainland Chinese and foreign tourists.
Tsim Sha Tsui, popularly known as TST among locals, saw the biggest decline in office rents in 2020, a fall of 21.7 per cent, worse than the 17.9 per cent decrease in the Central and Admiralty districts and the 15.9 per cent overall drop across Hong Kong, according to property consultancy Colliers. This year the district is likely to see another 8 per cent decline in rents, one of the worst performers along with Central and Admiralty.
Prime office space in Central, the city’s main business and finance district, had a vacancy rate of 7.3 per cent in December, a 16-year high as it surpassed 7 per cent for the first time since 2004, according to property consultancy JLL. The city’s overall vacancy rate crept up to 8.9 per cent from 8.8 per cent in the previous month.
The vacancy rate is expected to climb further as companies continue to either surrender or reduce their space.
Tenants looking to set up in Cyberport, a government-owned technology cluster on Hong Kong Island close to Central must meet various criteria they often find troublesome to comply with. The district also lacks a direct connection to the Mass Transit Railway.
It is unclear whether Hong Kong developers have realised the potential of Tsim Sha Tsui to become a technology hub in its own right, but analysts believe that if landlords take the initiative, the district is likely to be the preferred location for tech firms. Developers declined to comment for this piece.
Hong Kong is considered a “tech megacity” – one known for global connectivity, complementary industries and a deep talent pool, according to a Savills report released in December.
The megacities tend to be funding hubs too, as they attract venture capital investment. Still, in the 2019 version of the report, Hong Kong lagged behind Shanghai and Beijing in the Chinese tech city rankings. The report noted that affordability of property plays a role in the success of a city as a tech hub.
For Tsim Sha Tsui to completely change its landscape from being mainly a shopping area to becoming the tech district of Hong Kong, it needs to further improve its transport networks, said Ngan of Colliers.
“TST can further improve its attractiveness by improving proximity to the transportation network to the mainland,” she said.
More from South China Morning Post: