(AT Express) – Royal Bank of Scotland Group Plc, the U.K. lender scaling back its investment-banking business, is planning to reduce the office space it rents in Hong Kong’s Central business district by half, according to two people with knowledge of the matter.
The bank leases about 60,000 square feet in the AIA Central building, the people said, declining to be named because the information isn’t public. It plans to keep half of that for Coutts & Co., its private banking unit, and most of the other employees will move to Lincoln House in the eastern district of Quarry Bay, where RBS already leases space, by the end of the year, they said.
Office rents in Central, where banks such as HSBC Holdings Plc and Goldman Sachs Group Inc. have their regional headquarters, are falling as foreign financial firms continue to downsize or relocate to cut costs. Tenants in the city on three-year leases expiring this year may be able to negotiate on average rents that are 20 percent lower than current leases, according to Cushman & Wakefield Inc.
Alexander Chu, the Edinburgh-based bank’s country executive for Hong Kong, declined to comment on the move.
Rents in grade-A office buildings fell 1.8 percent in the first half and may decline 3 percent this year, according to a Cushman report last month. Rents in the greater Central area, which slid 0.5 percent this year, will remain stable for the next six months as demand is supported by mainland Chinese financial firms and smaller tenants, it said.
Grade-A office rents in greater Central were HK$96.30 per square foot a month in the second quarter, compared with HK$45.20 a square foot in Hong Kong East, where Lincoln House is located, according to data from Cushman.
AIA Central was developed by AIA International Ltd. and Lai Sun Development Co. (488)Lincoln House, which also has Australia & New Zealand Banking Group Ltd. and Lenovo Group Ltd. as tenants, is owned by Swire Properties Ltd. (1972)
RBS, the U.K.’s largest state-owned lender, is shrinking its investment-banking units around the world as it strives to revive profits. The U.K. government owns a majority of the bank after its bailout during the global financial crisis.
In Asia, RBS has already sold most of its investment banking business in the region to CIMB Group Holdings Bhd., Malaysia’s second-largest bank by assets.