The real estate market of Hong Kong is said to be one of the most expensive in the world, alongside New York, London, and Sydney. Yet, crypto startups are moving into the most valuable skyscrapers in the city.
On August 22, CCN reported that BitMEX, a popular cryptocurrency exchange that facilitates Bitcoin and Ethereum margin trading, moved its headquarters to Cheung Kong Center’s 45th floor, renting out 20,000 square feet at $28.66 per square foot.
Its old headquarters were based in Victoria Harbor, a region within Hong Kong that is known for expensive residential properties. In Victoria Harbor, BitMEX paid around $3.18 per square foot and in Cheung Kong Center, BitMEX is paying $573,200 per month, at a rate of $28.66 per square foot.
BitMEX will operate its office in the most valuable skyscraper with Hong Kong alongside major financial institutions such as Bank of America Corp, Barclays Plc, Bloomberg LP, Goldman Sachs Group Inc and the Securities and Futures Commission of Hong Kong.
Banks are Moving Out of Skyscrapers
According to a report released by SCMP, a mainstream media outlet in Hong Kong, even major banks like Goldman Sachs and BNP Paribas have started to explore cheaper locations for their offices in Hong Kong due to rising rental fees.
Annual office rental costs in Hong Kong Central average around US$307 per square foot a year, a rate that easily surpasses London’s West End and Beijing’s Finance Street.
BitMEX and Diginex Global, two crypto startups based in Hong Kong, are renting out 72,000 square feet in total, paying around $1.3 million per month.
“Blockchain companies show no signs of slowing their expansion in Hong Kong. These firms are leasing space in top-tier office buildings to attract and retain talent.” Philip Pang, an associate director of office services at Colliers, told SCMP.
The local publication reported that Goldman Sachs is relocating from Hong Kong Central to Causeway Bay in the next few months to save 30 percent on rent. BNP Paribas has also relocated its office to Swire Properties’ Taikoo Place.
While JPMorgan has leased the Quayside in Kwun Tong near Victoria Harbor, the cost of rent comes nowhere close to the rent BitMEX will be paying throughout the years to come.
Landlords Not Confident in Crypto
Over the past nine months, despite the 80 percent drop in the valuation of the crypto market, cryptocurrency-related businesses have prospered. Specifically, exchanges have continued to generate large revenues.
However, local publications have reported that Cheung Kong Center demanded BitMEX to pay a year’s rent upfront, which is estimated to be around $6.8 million, demonstrating the lack of confidence in crypto-related businesses by major landlords in the Hong Kong real estate market.
“It’s pretty common for landlords to ask for larger deposits from tenants with weaker covenant strength. Landlords are always open to taking on new tenants, it’s just a matter of balancing rent against flight risk,” said Denis Ma, head of research at Jones Lang LaSalle.
With the one year’s rent at Cheung Kong Center, it is possible to purchase multiple story buildings in many major cities like Kuala Lumpur, Ho Chi Min, Tokyo, and Busan.