This deal had a significant impact on Hong Kong’s office leasing market

It’s the largest single leasing agreement over the last decade with its monthly rent of HK$30m.

The Jane Street deal has profoundly influenced the Hong Kong office leasing market, according to a Savills report. With a monthly rent of HK$30 million, it is the largest single leasing agreement over the last decade in Central. The timing of this pre-leasing, occurring 30 months prior to lease commencement, underscores its significance for both the tenant and the landlord.

“Jane Street’s near doubling of floor space requirements signals clear expansion needs, reflecting strong business prospects for quant funds and liquidity providers engaged in complex trading strategies within local and regional financial markets. This underscores Hong Kong's robust appeal as an international financial center, particularly for sophisticated market participants who favor prime offices in core Central locations for their workplaces and regional headquarters,” the report added.

Here’s more from Savills:

The average rent of HK$137 per sq ft for the initial five-year lease term of this deal exceeds the current average for Grade AAA offices in Central, as well as surpassing the overall average rents of the Central Grade A office market. This disparity highlights the quality and strategic positioning of the Central Site 3 office, making it particularly attractive to discerning financial tenants, and indicates a medium-term shortage of available prime office spaces in core Central areas.

This deal is set to significantly impact both first and second-hand supply in prime Central. Prior to this lease agreement, the Central Site 3 Phase 1 office, coupled with the anticipated relocation of UBS from Two IFC and other premises, was projected to introduce a total of 480,000 sq ft of first and second-hand stock to the market in 2027. 

With the Jane Street deal, half of this vacant space will be absorbed, while Jane Street's eventual relocation will vacate approximately 120,000 sq ft in 2028, effectively reducing and delaying the availability of prime office spaces in Central. This transition allows both landlords and prospective tenants ample time to explore leasing opportunities, aided by a 30-month window for negotiations.

Forecasting the demand-supply dynamics for the Central office market may reflect trends seen in the overall market, although take-up could be limited by constrained supply. Historical average take-up from 1991 to 2010 was 430,000 sq ft per annum, driven by strong demand from multinational and Mainland Chinese banks during times of abundant supply. Including an average of 43,000 sq ft per annum from the sales market, total take-up over the next few years could reach 470,000 sq ft annually, assuming sustained new financial demand and stabilized traditional demand.

The rental inflection point for the Central office market has demonstrated greater resilience than the overall market. Historically, when vacancy rates declined to 6% to 8% during downturns, office rents have rebounded, as observed over the past 20 years. If this trend continues, with approximately 560,000 sq ft of new office space anticipated to come online primarily in 2025 and 2026, the Central office vacancy rate could reach 8% by 2027, with rents expected to recover several years ahead of the overall market.