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News Release

Hong Kong

Industrial building tenants capturing opportunity to upgrade offices

HONG KONG, 22 July 2011 – As more and more landlords and investors come to sell and convert industrial buildings to offices for higher returns in recent years, a trend has emerged for tenants or owner-occupants who originally reside at these industrial buildings to seize the opportunity and upgrade their offices to Grade A commercial buildings.

‘In view of the higher return for commercial buildings and the successful experience in Kowloon Bay and Kwun Tong area, landlords and investors are keen to sell out industrial buildings and convert them to offices. This development has brought about another trend – when tenants or owner-occupants who originally resided at these industrial buildings had to vacate, they took the opportunity and upgraded their offices to Grade A commercial buildings. In fact, we have helped quite a few tenants and owner-occupants to relocate from industrial buildings to commercial buildings in recent years,’ said Gavin Morgan, Deputy Managing Director and Head of Leasing at Jones Lang LaSalle Hong Kong.

One of the most recent examples is Charming Shoppes which sold their premises in Hunghom Bay Centre in March 2011 and then leased 27,341 sq ft of office space in Two Landmark East, Kwun Tong.  The size and layout of the building meant that an upgrade would not alter business operations.

Kinetsu World Express also looked to upgrade their 17,000 sq ft of industrial office to Millennium City 6 in this year. This upgrade was in response to a trend of tenants in owner occupied premises capitalising on landlords purchasing industrial buildings and converting them to office buildings.

In fact, this trend began in 2008 when Jones Lang LaSalle assisted Triumph to relocate from 133 Hoi Bun Road which was sold at the time to Billion. ‘Landlords have been quickly selling and converting industrial buildings to office buildings to further enhance their investment. This has meant that many industrial tenants have relocated and upgraded to office buildings.  Even though a premium rental is paid, the abundant office supply at Kowloon Bay and Kwun Tong offer many flexible and affordable options. This trend started a few years ago and is still going on now. We expect to see more and more of this kind of relocation in the coming years,’ said Gavin.