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Reuters reports that UBS’ rent in Hong Kong may rise 10 times when its current lease expires in 2014.The Swiss bank has enjoyed a below-market rate at Two International Finance Centre for almost a decade, but when that deal ends, they face a sharp return to the realities of one of the world’s most expensive real estate markets.
The rent could increase by $42 million. Its current rate is just under $5 million.
As Reuters notes, while the total value is relatively small for a global institution like UBS, it comes at an inopportune time for a bank trying desperately to cut costs and has limited options available:
Unlike rivals Morgan Stanley, Credit Suisse and Deutsche Bank, which all struck fresh Hong Kong leases in a new building in recent years, the pressure is on UBS to sort out its space needs in Asia’s financial capital…
…Occupancy costs account for only around 8 per cent of an investment bank’s expenses, and $42 million may not seem like much to an institution valued at $54 billion. But UBS is in a major, global cost-cutting programme, so the prospect of a big rent hike in such a large banking operation is ill-timed.