Bank of America cuts back on office space in Hong Kong amid impending new supply

US banking giant Bank of America plans to relinquish a big chunk of prime office space in Hong Kong as part of cost-saving measures in response to the headwinds facing the financial industry.

Bank of America will hand back around one and a half floors in Cheung Kong Center, Central, to the landlord, CK Asset Holdings, where it has leased seven floors since 2012, according to sources familiar with the matter.

The bank will relocate its back office operations to Kowloon Commerce Centre in Kwai Chung.

“The move aligns with the prevailing cost-cutting trend in the industry,” said an industry source. Bank of America, which has support staff in Kowloon, declined to comment.

Several banks and financial firms have opted to downsize their office space or relocate to less expensive buildings in the face of muted financial activity in the city. Last year, turnover on the city’s stock market declined 16 per cent to HK$105 billion (US$13.4 billion), according to Hong Kong stock exchange data. Additionally, fundraising on the stock market plunged by more than half to a 20-year low of US$5.9 billion, according to Refinitiv data.

In a similar move, it was reported last month that Goldman Sachs would vacate one floor in Lee Garden Three in Causeway Bay. The bank had leased five floors in the grade A building for its back office operations in 2018.

The vacancy rate in the Greater Central area fell by 0.3 percentage points to 10.1 per cent in the fourth quarter of 2023, according to CBRE. However, rents in Greater Central dropped by 3.1 per cent quarter on quarter as landlords of grade A buildings adjusted their rents in response to new supply, the property consultants said.

CBRE, however, anticipates an improvement in new leasing this year as the mainland Chinese economy gradually recovers and the anticipated US interest-rate cuts boost financial market sentiment.

With the Federal Reserve likely to keep its benchmark interest rate unchanged at its meeting on Wednesday, as well as at its subsequent meeting on May 1 due to the higher than expected inflation reading, analysts realistically expect the rates to trend lower sometime in the second half of the year.

Meanwhile, leasing sentiment in Hong Kong remains the poorest in Asia-Pacific, according to a survey by CBRE.

Sentiment among leasing market professionals in the city and mainland China was overwhelmingly pessimistic at around negative 20 per cent, “the only markets to report negative sentiment, indicating that more time will be needed for these markets to recover”, the report said.