Morgan Stanley moves to West Kowloon

The investment bank rents 10 floors in the soon to be third tallest building in the world, the ICC in Hong Kong's West Kowloon district.
Morgan Stanley has announced that it will lease 10 floors in the International Commerce Centre (ICC), making it the first investment bank to cross Hong Kong harbour and open offices in West Kowloon.

It expects to relocate its entire staff of roughly 1,500 people working in Hong Kong (which is where its Asia-Pacific headquarters are based) at the end of 2008.

ôWe have had positive experience in being among the first banks that moved into newly developing business locations, such as midtown in New York and Canary Wharf in London,ö says Hans Schuettler, Asia CEO of Morgan Stanley, adding: ôWhat initially always seems a world apart in a few weeks proves to be the right step.ö

If you donÆt know your way around Hong Kong, hereÆs the quick low-down. West Kowloon is across Victoria Harbour from Central, which is on Hong Kong island. Most investment banks are located in Central or neighbouring Admiralty. While a huge percentage of Hong Kongers regularly commute more than an hour to work, taking ferries, buses and trains, many others û particularly white-collar workers in Central and Admiralty û never leave the island.

Now the lure û at least to the ICC building û is undeniable. The ICC, which is being developed by Sun Hung Kai Properties, is currently only half of its planned height of 118 storeys. But you already canÆt miss it. And even if you donÆt end up working in the tower, chances are youÆll visit it. It will boast around 35 restaurants, cafes and bars and the shopping mall planned for the building will be around 25% bigger than the mall in IFC2. A gym is planned for the building, an ice rink, and a 12-screen cinema. Out-of-towners may end up booking into the trendy W Hotel, or in the Ritz-Carlton, which will be at the top of the ICC, thus making it the worldÆs highest hotel.

But you may also end up working in the building. Banks, after all, have to consider West Kowloon. For one, thereÆs cost. Grade-A office space in Central averaged HK$91.04 per square foot for the month of May, but that includes the rent of some of the smaller, never-meant for a bank, space still scattered about district. According to the South China Morning Post, Morgan StanleyÆs relocation cuts the bankÆs rent by HK$4.5 million a month to about HK$10.5 million, although Morgan Stanley officials declined to comment.

But more important, thereÆs simply no room left in Central and Admiralty. Morgan Stanley, for example, has nearly doubled its headcount from five years ago. As a result, it has been occupying office space in five buildings across Hong Kong. The move to the ICC building enables it to consolidate everyone in one spot.

Given that the average vacancy rate for grade-A office space was down to 4.05% in May, from 4.53% in February, while most banks are still hiring more people, the space crunch is real.

Now with Morgan Stanley moving out of Central the occupancy rate is somewhat alleviated û surely someone will be keen to take its space in Three Exchange Square. Several bankers, off the record, joked that they're loathe to move off Hong Kong island - they'll just wait for other banks to move, and thus make more room in Central and Admiralty.

But who else might join Morgan Stanley in West Kowloon? While no one is raising a hand just yet, most bankers will tell you that they are going to have to at least consider the ICC. As one banker said: ôIf you find someone who says, æweÆre not lookingÆ or æweÆre happy with what we haveÆ, either they have no growth plan or they are lying.ö

ôWeÆre obviously going to have to look at what theyÆre offering over there,ö says Sim S Lim, Citi country officer, Hong Kong. ôKowloon is only five minutes away, if the price ends up being one-third or one-fourth of what it is here, you have to start looking at that.ö

ôWeÆll look over there û you have to, itÆs allegedly going to be 40% cheaper. You canÆt ignore that,ö says Barclays chairman and CEO Asia-Pacific, Robert Morrice.

Meanwhile, as first movers, Morgan Stanley got to make a splash. The signing ceremony included Raymond Kwok, vice chairman and managing director of Sun Hung Kai Real Estate Agency, and Schuettler of Morgan Stanley. Both wore corsages (and removed them as early as possible), and clinked flutes of champagne after they signed the ceremonial lease agreement at 3pm before a room full of reporters at the Four Seasons hotel. In a case of advertising you couldnÆt pay for, Kwok began by saying, ôAs all of you know, Morgan Stanley is the best investment bank worldwide...ö With comments like that, it may well be worth leading the way across the water.
¬ Haymarket Media Limited. All rights reserved.
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