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International law firms in Hong Kong have historically been housed in Central, the city’s financial district. But in the past six months, several have relocated out of Central to Quarry Bay in eastern part of Hong Kong Island, lured by lower rents and more modern spaces.

Berwin Leighton Paisner was the first international law firm to make the move. At the end of September last year, BLP moved 7 kilometres away to Swire Properties’ Taikoo Place in Quarry Bay, a neighbourhood where rents can be as low as half that in Central.

Not long later, fellow London firm Ince & Co moved to One Island East, also owned by Swire Properties, just a block away from BLP.

The trend towards Quarry Bay could pick up speed with Freshfields Bruckhaus Deringer also making the move there in December this year, making it the first Magic Circle firm to set up shop outside Central.

Freshfields will be taking up two floors on One Island East, totalling 40,000 square feet, in addition to moving up to the 36th floor of Two Exchange Square, the firm’s existing office in Central.

“We are upgrading our premises in Hong Kong,” the law firm said, describing their new office in Quarry Bay as “more modern.”

Ince also thought One Island East was more modern, choosing Quarry Bay ahead of Admiralty, Wan Chai and Causeway Bay because it felt the buildings in those areas were too old for its purposes.

“We needed state-of-the-art infrastructure, like here at One Island East, to be able to implement our very modern technology and IT upgrades,” said Lionel Noronha, Ince & Co's regional director in Asia. “The older-style buildings would have made the technology upgrades challenging and costly.”

“We also wanted to go open-plan and agile in the way we work,” he added. “The buildings in those other areas would not have accommodated this with their small box windows, lack of raised flooring, inferior IT and cabling infrastructure.”

For Bob Charlton, BLP’s head of Asia, moving to Taikoo Place was not just about the office interiors but also about the exterior. “It's got a really good ambiance and there are loads of businesses here, so it's busy and you get a real buzz in the area,” says Charlton.

“The lunch venues around here are fantastic and they're cheaper than Central, so that keeps our people happy.” he adds. “And also you can go running, there’s good gyms here… there's everything you need.”

LOWER RENTS

And of course, the lower rents are helping as well. According to real estate services firm JLL, monthly Grade A office rents are currently at an average of HK$112 ($14.50) per square foot in Central, whereas it’s HK$64 per square foot in Wan Chai and Causeway Bay. Rents are even lower at HK$48 per square foot in Hong Kong East, where Quarry Bay is located.

“The agglomeration of industries outside of Central, such as insurance and shipping in Hong Kong East and Kowloon East, plays a role, but rental cost is probably the biggest driver,” said Denis Ma, head of research at JLL in Hong Kong.

Charlton said the firm surveyed Central with JLL, and found there wasn’t much space around, especially since the law firm had to consolidate three offices in Hong Kong – their previous office on Connaught Road in Central, the former Haley & Co office in the Hong Kong Club also in Central, and William KK Ho & Co’s office in Wan Chai.

“Central was upwards of 98 percent occupied and the space that was available wasn’t particularly great – it's a bit higgledy-piggledy,” says Charlton. “So we decided to look at other options.”

“While we were doing that, we conducted a survey of our best clients, and they said they didn’t really mind where we were,” he said. “All they care about is effective service delivery, and they don’t think it's essential for their law firm to be located in Central. They just want the best service at the most efficient price and value for money. So they were completely open-minded.”

JLL’s Ma forecasts the rental gap between Central and the city’s other major office markets is likely to widen over the near term and expects the decentralisation of the legal sector away from Central to continue.

“Moreover, Freshfields’ move has set the wheels in motion for many other law firms to consider moving offices away from Central,” Ma said. “This is similar to what we saw in the banking sector when Morgan Stanley opted to relocate to ICC in Kowloon, and, more recently, Citi’s commitment to Kowloon East. Once some of the bigger players move, you will often find others following.”

If there’s anything the Quarry Bay-based law firms miss about Central, it’s the proximity to the courts, but it didn’t pose much of a problem.

Ince says their court clerks didn’t find being further away from the courts to be a huge inconvenience. “Our more flexible working arrangements and going agile has eliminated any issue with that,” says Noronha.

BLP’s Charlton also isn’t concerned. “Sure, our litigators have to plan their visits to the court. When they go to Admiralty, they have to think it through, but I wouldn’t say that's a disadvantage – it's just a practicality,” he said. “To be honest, Quarry Bay has got so much going for it. I don’t miss anything about Central.”