Henderson banks on tenant ‘FOMO’ to fill up US$8b Central Yards project

Henderson Land Development is relying on the demand for high-end office spaces to bolster its HK$63 billion (US$8.03 billion) Central Yards project, as businesses flock to top-tier buildings even as much of Hong Kong's office market remains sluggish. Last year, Jane Street secured about 70% of the office space in the project's initial phase, which has significantly attracted other prospective tenants, according to Tom Andrews, director and head of leasing and operations at Central Site 3 Management Limited, a Henderson subsidiary overseeing the Central Yards project.

Andrews described the Jane Street deal as providing "a real seal of approval from a great anchor client". Demand for the remaining 30% of available office space is expected to come from a mix of quantitative trading firms, multinational corporations, private equity funds, and wealth managers. This trend highlights a growing disparity in Hong Kong's office market, where interest has concentrated in newer, superior buildings while older offices continue to struggle with vacancy rates and declining rents.

Although demand has grown, the market has not yet reached a point where tenants are competing for space. However, with the prime buildings filling up, some tenants are beginning to feel a "fear of missing out" on superior office locations. Occupancy rates remain strong in some of Central's premier office buildings, with One and Two International Finance Centre nearly completely occupied and The Henderson surpassing 95% occupancy.

Henderson acquired the prime waterfront site for Central Yards in November 2021 for HK$50.8 billion, a record price at the time, just before Hong Kong's office market entered a prolonged downturn. The project spans over 1.6 million square feet of gross floor area, with approximately 40% dedicated to offices and 54% to retail. In terms of retail, Central Yards faces a different challenge as Hong Kong's tourism recovery has not consistently translated into stronger consumer spending, putting pressure on landlords and retailers.

To address this, Henderson is "giving people excitement" by bringing in fresh elements that represent both Hong Kong and the global stage. On Tuesday, Henderson announced that Kim Jones, the British designer's new fashion label, would be the first retail anchor at the waterfront project, set to open its inaugural global flagship store, approximately 4,000 square feet across two floors, in 2027.

The first-phase retail area of Central Yards spans around 300,000 square feet and is slated to open in 2027, featuring a mix of fashion, lifestyle, and dining businesses over about 100 brands and concepts. At the launch event, Henderson Land chairman Martin Lee Ka-shing emphasized that Central Yards is not just a development, but a "love letter to Hong Kong", while his wife, Cathy Chui Lee, shared insights with Jones on the designer's new label and his connection to the city.

Jones expressed his appreciation for Hong Kong's blend of cultures and the juxtaposition of the old and the new, stating that he sees things in the city that are unique elsewhere. For now, Andrews stated that his team is scouting for retail concepts globally, visiting markets like mainland China, Europe, Japan, and South Korea, while monitoring trends and leveraging their connections across Henderson.

The project's success will be measured by investment returns, visitor traffic, and its ability to generate lasting interest.