Broker’s Interview on Conservative Leasing Strategies across the Hedge Fund Sector

June 6, 2017

 

Relocations to ‘fitted’ space in Central preferred

 

With Central’s office vacancy rate nearing historic lows at 1.9%, we are seeing increased cases of occupiers in the district relocating to fully fitted premises (between 1,000 and 3,000 sq ft) – often off-market and previously occupied by Hedge Funds or related firms. With increasing CAPEX costs, most Hedge Funds seek office space previously occupied by similar companies in which the existing fit-out offers a near “plug & play” solution that avoids capital expenditure.

 

Most established Hedge Funds’ headcounts remain stable, with few seeking expansion. Similarly, we have seen numerous high profile funds downsize considerably or shut down entire operations, such as Hutchin Hill Capital, Bluecrest Capital and Guard Capital - all of which discontinued their operations this year and whose premises have been left in fully fitted condition.

 

Market volatility reflected in more cautious leasing activities

 

Due to market uncertainties, not only have we seen the frequency of ‘new launches’ decrease, but recent trends indicate that more cost-effective buildings are preferred, such as those along Duddell Street and Queens Road Central. In addition, due to the high rent

environment across Central, more funds are exploring decentralised locations such as Wong Chuk Hang, Cyberport and Island East where rents are a fraction of the cost – two prime examples being BFAM and Seres Asset Management.

 

The volatility across the industry has also affected the perception of Hedge Fund covenants, with many landlords associating higher risk with these occupiers and insisting on deposits between four and nine months rent instead of the standard three months rent.

 

Piers Steward & Philip Pang

Specialising in office leasing for the Hedge Fund sector, Piers & Philip have a combined 10-year experience in Tenant Representation, having expanded Colliers Hedge Fund desk and transacted more than 60,000 sq ft of office space across the sector in the last four years.

 

Published: June 2017

By: Colliers International Office Insider June 2017

 

 

 

 

 

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