Nomura Securities To Further Downsize Office Space In Two IFC

HONG KONG – After terminating a part of its lease at Hong Kong’s Two International Finance Centre (IFC) in May, Nomura Securities is returning an entire floor spanning 23,076 sq ft at the office building, reported Mingtiandi on Wednesday evening (8 June, SGT).

The Japanese securities brokerage firm is slashing its Hong Kong office space amidst the city’s economic slowdown and weak listing market. In fact, the local bourse only saw 17 companies raising a total of HK$14.9 billion (US$1.8 billion) in Q1 2022, which represents an 89 percent slump from the volume seen in the same period last year, based on data from S&P Global.

Meanwhile, Jefferies is said to be taking over Two IFC’s level 26. In April 2022, the financial services firm committed to occupy units 10 to 12 at the office tower’s level 27, which Nomura Securities had surrendered in 2020. Notably, Jefferies long-time office in Hong Kong is located at the 22nd floor of Cheung Kong Centre in Central that is owned by CK Asset.

Originally, Nomura Securities had agreed top lease nearly six floors at Two IFC with a combined area of 140,000 sq ft in 2019. But so far, it has returned roughly 56 percent of that office space, shared Alex Leung, Senior Director at CHFT Advisory and Appraisal.

Before relinquishing level 26, the Japanese brokerage firm was paying a monthly rent of around HK$3 million, or about HK$130 psf per month. Sources revealed that current monthly office rents at Two IFC average at roughly HK$120 psf to HK$130 psf.

While these rates are the highest in Hong Kong’s Central, the cost to lease office space at the 88-storey office building has declined by 25 percent since Q1 2019, noted Leung. Notably, average office rents in Greater Central have fallen by about 30 percent to HK$97.80 psf in Q1 2022 compared to the same quarter in 2019.

In comparison, office rents at Cheung Kong Centre average HK$110 psf per month and this is only slightly lower than Two IFC, shared market watchers. Nonetheless, Two IFC’s waterfront location, proximity to Central and the Mass Transit Railway (MTR) stations, as well as its linkage to IFC mall could be among the reasons why firms such as Jefferies have committed to occupy more office space there, added Leung.

Notably, Nomura Securities’ remaining tenancy in 2 IFC will expire in December 2023. At present, it’s occupying floors 30 to 32 at the office building, which presently has an occupancy rate of 97.5 percent.

“Many financial services firms are adopting flexible working practices as a more permanent way of working and are typically downsizing on lease expiry,” commented Savills.

The property consultancy disclosed that roughly 11 million sq ft of new Grade A office stock is expected to enter Hong Kong’s office market from 2022 to 2025, with minimal pre-commitments from tenants. This surge in new office space could lead to 17.2 million sq ft of office supply in the next four years, with Savills forecasting that the vacancy rate could increase up to 17.7 percent.