The high-profile tower initially struggled to lease out space, but is now testing HK$100 per square foot rents amid rising demand for Central offices
Cheung Kong Center II is testing office rents above HK$100 (US$12.75) per square foot, as the once slow-leasing tower begins to close the gap with Central’s most in-demand office buildings, according to property agents.
The increase marks a turnaround for one of Hong Kong’s most closely watched office projects.
Completed in 2024 by CK Asset Holdings – the property company controlled by billionaire Li Ka-shing’s family – the 41-storey tower was designed as a flagship Central development, but struggled to gain traction after opening into one of the city’s weakest office markets in decades.
At the start of this year, the building was only about 20 per cent occupied, according to a property agent.
That has improved dramatically in recent months amid a broader recovery in the local market. By June, the occupancy rate at Cheung Kong Center II had risen above 50 per cent, the agent said.
Other agents said the figure could be higher, as leasing momentum further strengthened in June and July, with transactions completed almost every week.
The uptick has also started to translate into firmer rents. Recent leasing transactions at Cheung Kong Center II have exceeded HK$100 per square foot, bringing the building closer to rental levels achieved by Central’s leading office towers.
CK Asset did not immediately respond to a request for comment.
Prime buildings such as One International Finance Centre and Two International Finance Centre have recorded rents above HK$130 per square foot, with both buildings seeing rental growth of more than 20 per cent, according to a property agency.
The recovery also appears to have validated CK Asset’s decision to hold firm on rents rather than prioritise faster leasing during the downturn.
Executive director Justin Chiu Kwok-hung said at CK Asset’s March earnings call that the company “can wait for market conditions to improve” and was “under no pressure to rush” leasing at Cheung Kong Center II , citing the project’s relatively low cost base and the group’s strong financial position.
Unlike new developments acquired through costly government land tenders, the tower was a redevelopment of Hutchison House, giving CK Asset more flexibility to wait for market conditions to recover.
That patience has since coincided with a stronger-than-expected rebound in leasing activity. One leasing agent familiar with a recent transaction said lower-floor office space at Cheung Kong Center II was leased at about HK$100 per square foot in June, representing a 15 per cent to 18 per cent increase from late last year. Two other agents familiar with the market also confirmed that rents had reached that level.
“ CKC II’s occupancy rate has increased in recent months. We would fully expect a strengthening in rental tone, with the outperformance of newer high-quality buildings in Central,” another agent said.
The agent said the spillover effect remained concentrated in grade A1 buildings and select properties, and cautioned that asking rents could differ significantly from achieved rents.
The first agent said mainland Chinese companies accounted for a relatively high proportion of Cheung Kong Center II’s tenants, while more technology firms had also moved into the building.
The agent said the tower’s harbour views and smaller office suites – which start from about 3,000 sq ft – have helped attract occupiers looking for a Central location.
While improving demand for Central offices has been the main driver of the recovery, market participants said other factors had previously held back leasing, including political concerns among some mainland occupiers and the building’s initial office layout.
Some prospective mainland tenants – including financial institutions and state-owned enterprises – delayed site visits or leasing decisions after CK Hutchison’s proposed sale of its Panama ports business to a BlackRock-led consortium drew public criticism from Beijing last year, according to several people familiar with leasing discussions.
The people said those concerns had now “faded”, while a redesign of some subdivided office floors had also helped support leasing activity, as an earlier layout had proved less attractive to prospective tenants.
According to a local property agency, the vacancy rate for grade A office space in Central fell to 10.41 per cent in June from 14.19 per cent a year earlier, highlighting the improving conditions in the district’s prime office segment.
Another agent said demand from hedge funds, asset managers and financial institutions remained resilient.
Another agent said mainland financial firms and state-owned enterprises had become more active in leasing grade A offices in Central and Admiralty.
“ Cheung Kong Center II had room to catch up with rental levels at The The Henderson and Two International Finance Centre , but those buildings were unlikely to wait for competitors to close the gap as their own rents continued to rise,” another agent said.
