OFFICE MARKET

 

COUNTRY FACTS

CURRENCY CONVERTER

WORLD TIME ZONES

METRIC CONVERSION

INTERNATIONAL HOLIDAYS

 

China bank purchases 50 Connaught Road from Apollo

50 Connaught Road covers site area of approximately 11,488 sq ft, the property is a 28-storey Grade A office building completed less than a year ago. Based on the total gross floor area of 175,481 sq ft, the average unit price is HK$27,809 per sq ft (gross).   Based on the latest transacted rent of HK$135 per sq ft per month in the Property, the yield is approximately 4% per annum (p.a.), representing a level higher than the current average Grade A office yield ranging from 3.0% to 3.5% p.a.

Considered a rare gem in supply-short Central, the property enjoys 46 meters frontage (151 feet) on Connaught Road Central facing Victoria Harbour, Central and the Kowloon peninsula. With only a short distance to major office portfolios such as Exchange Square, International Finance Centre and The Landmark.


Photo - CNMARK

NOTEWORTHY:

Office Rentals in Hong Kong rose by 28.5% last year
World's most expensive real estate market

  -- 2011

Hong Kong Class A Office space $150 - $160 per sq ft
Per month - the world's most expensive market

Cost per square foot:
Hong Kong: HK$10,821 (US$1,396)

Number of sales:
Hong Kong: 27

Change in number of sales from a year ago:
Hong Kong: 8%

Total cost of sales:
Hong Kong: HK$6.5 billion

- Q32010 JONES LANG LASALLE


-- 2011   SCMP

HK office rents top world survey for second year

Cavernous flyovers and hidden stairways weave through the tightly-packed central business district of Hong Kong. They are the arteries of this city, linking to its most expensive office addresses, such as One IFC (International Finance Center), Two IFC, and Chater House.

For the second year running, these nondescript office blocks boast the world's most expensive rents, commanding a rate of US$192 per square foot per year on average for grade A class, 44 per cent more than those found in West End London, the second placer, at US$133.02. Tokyo ranks third, with US$105.

Tenants now have to pay 1.6 times more in Hong Kong than the same space they would otherwise find in Singapore, which, at US$73.51 per square foot, ranks ninth on the global scale, according to the annual survey of global office real estate market released late on Monday by real estate consultancy Colliers International.

Hong Kong's high-flying real estate market, led by grade A offices and luxury residences, is the tip of the iceberg of an extraordinary housing boom in Asia-Pacific. 'With the exception of Asia-Pacific, all regions reported lower or stable vacancies while rents were more mixed,' Colliers says in the survey.

A construction binge is underway in Asia-Pacific, as much as 165.6 million sq ft as of 2010 year end, contributing to 42 per cent of the global construction. Five years ago, before the financial crisis struck, the figure is 45 per cent less, at only 91.1 million sq ft. Construction concentrates in nine cities, namely, Beijing, Chennai, Delhi, Guangzhou, Ho Chi Minh City, Jakarta, Shanghai, Singapore and Tokyo, all building at least five million sq ft each. All told, they account for 85 per cent of total projects currently underway. Shanghai tops the world in construction, followed by Moscow and Ho Chi Minh City.

Colliers notes a pickup in office investment sales activity in the second half of 2010 and suggests continued growth for 2011, but cautions against the increased threats to global economic recovery posed by surging energy prices, geopolitical tensions in the Middle East and North Africa, as well as uncertainties from Japan. But the usual lags in leasing market mean any signs of slowing prices would not emerge till the second half of the year.

In Hong Kong, demand remains strong, despite having the world's most expensive office space, with vacancy rate of just 3.1 per cent, the lowest in Asia-Pacific. Here, office rents for Grade A office soared by 36 per cent for the full year of 2010, rivalling the 37 per cent increase registered in Singapore for the same period. Across the region, demand is softening, albeit slightly, as vacancy rate inches up 44 basis points to 12.36 per cent. Colliers expects continued economic expansion would support demand particularly in China, India, the Philippines and Indonesia.

Office rents in Asia-Pacific rose on average of 4.6 per cent in the second half of 2010, a modest pace. But hefty price hikes were recorded in Beijing, Guangzhou, Ho Chi Minh City, Hong Kong, Seoul, Shanghai, and Singapore. Only two major cities, Perth and Wellington saw office rents falling, by 7.4 per cent and 8.7 per cent.   -- 2011 April 13   BUSINESS TIMES


-   2010  October 27    SOUTH CHINA MORNING POST

Stable outlook for Hong Kong's roller-coaster property market

After a bumpy 2008, the Hong Kong real estate market has made a robust recovery so far this year. Prices and transactions rose dramatically in the first half, particularly in the high-end residential market. Sales more than doubled across all segments between April and June 2009 and prices are now approaching the last peak in 2007 to 2008. In July alone, prices rose 9% compared with the average for the previous six months. And buyers have snapped up recent launches, showing that demand is resilient

The recovery is mainly attributable to capital inflows, or hot money, and aggressive mortgage lending. In addition, record-low land supply has helped to keep prices high and low interest rates have encouraged buyers, including upgraders in the mid-end market and investors.

That could change if the economic recovery proves tepid and investment sentiment deteriorates. But Standard & Poor's Ratings Services believes that limited supply, low interest rates and strong sales to date still support a stable sector outlook.

The worst seems to be over for investors

The worst of the downturn appears to be over for the commercial sector, with operating conditions having begun to stabilise in recent months (see chart 1). In the first half of 2009, most landlords reported improved income due to positive rental reversions. That means existing tenants signed up for new leases at higher rents. While spot rents have generally held up, the rental market is still under pressure due to growing competition from new business districts, such as Kwun Tong, where rents are lower. Although financial services clients are selectively hiring again, this hasn't translated into expansion because many companies still have available office space as a result of previous layoffs.

Nevertheless, vacancy rates remain in the low single digits for most landlords despite a contraction in demand. That's because there's only a limited supply of new large office buildings in established commercial districts to compete for tenants. By contrast, in the last downturn in 2002-2003, vacancies rose to double-digit rates.



We don't think the sharp increases in property prices are sustainable in the residential segment, and expect continued volatility -- particularly at the high end of the market. The pace of transactions is likely to slow in the second half of 2009 due to fewer properties for sale and somewhat weakened affordability levels as prices have increased. In terms of pricing, we expect a stagnation in the mid-market until the economy improves and unemployment starts to ease. Rental rates are improving but yields, which are at a decade low, are depressed by higher prices. High-end prices are likely to remain volatile.

Rental pressure in the office sector should continue until the economy improves and the recovery is entrenched. Rental reversions are likely to be neutral or down over the next 12-18 months with spot rents under some pressure. Vacancy rates should rise due to stronger competition.

Key risks to a sustained recovery

A sudden and massive reversal of capital flows, which would weaken commercial banks' appetite for lending, is the biggest risk to market stability. This could happen if the investment environment becomes less certain and investors' risk aversion increases. A tightening of credit and higher mortgage rates would undermine demand for residential properties (see chart 2).



An increase in interest rates could also unwind investment demand, which is to a large degree supporting transactions and prices, particularly in the high-end segment. However, we don't expect interest rates to rise. Hong Kong rates track those in the US because the dollar is pegged to the greenback. Our house view is that the Fed rates will remain at almost zero through most of 2010. Continued low interest rates should lift buyers' affordability levels and investment demand.

The supply of new properties is unlikely to materially rise over the next two years. That's because of development lead times and the government's de facto "high land prices" policy, assuring a controlled land supply. A slowdown in construction schedules this year has also kept supply down (see chart 3). In the first half of 2009, the start of construction on new projects hit a 10-year low after steadily declining for the decade. This is having a knock-on effect on project completions and is keeping prices high.



The outlook for real estate companies

We believe credit profiles are stabilising due to the improved property sales and resilient rental income (see table). Developers have locked in solid sales in the past 12 months at good margins, and the limited supply of new projects should underpin healthy demand for new property launches.

Property investors are likely to see limited improvement in their financial performance as rental reversions are likely to be flat to down while vacancy rates should rise. In the residential segment, we expect the financial performance and credit ratios of several developers to improve mainly because of property sales.

We see three key constraints on our stable outlook for developers. First, sharp and large increases in interest rates, which would reduce affordability for owner-occupiers and increase holding costs for investors. Second, a reversal of the hot money flow that created investment demand for real estate and has supported banks' aggressive residential mortgage lending at record-low interest rates. And, finally, a prolonged recession or slow economic growth with limited improvement in employment, which would continue to depress the rental market and yields, which are already at a 10-year low.

We believe developers with large land banks and diversified products are the best positioned to weather the market cycles and likely continued volatilities. Rated property investors should continue to benefit from the resilience of the rental market given their high-quality rental properties. Investors that are expanding their portfolio of projects overseas, including Swire Pacific (A-/Stable/--) and Hongkong Land Holdings (BBB+/Stable/A-2), should benefit from increased diversity and stability of cash flows. For the overall sector, the foundations are in place for a solid recovery, supporting our stable industry outlook.



Christopher Lee is a director at Standard & Poor's Ratings Services in Hong Kong  - 2009 September 25   FINANCE ASIA

Mainland offices in HK up 6%

The number of local offices from the Mainland rose 6% to 527 in June from last year's 499, although an Invest Hong Kong annual survey showed a 3.3% dip in the total number of non-local business operations in the city.

Releasing the survey results today, Director-General of Investment Promotion Simon Galpin said the global financial and economic downturn inevitably meant many companies have had to consolidate their international operations.

"The drop in regional headquarters and regional offices is largely due to consolidation and retrenching, with companies changing their status of regional operations down to local offices to cut costs, and for some companies, to focus on their short-term survival," Mr Galpin said. He added global foreign direct investment inflows dropped 14.1% last year, and will likely fall 29.4% this year.

The number of overseas, Mainland and Taiwanese regional headquarters, regional offices and local offices in Hong Kong fell to 6,397 from 6,612 last year. However, Mr Galpin considered this a fairly good result given the global economic crisis, reaffirming investors' confidence in Hong Kong's enduring advantages.

He said although there are fewer regional headquarters, they account for more jobs, with the average number of staff employed increasing from 109 to 114 per company on a year ago. The number of regional headquarters in financial services and banking also rose, from 119 to 129. 

"This really reinforces Hong Kong's role as an international financial centre and means Hong Kong is closing the gap on London and New York," he noted.

Regional business hub

Overseas, Mainland and Taiwanese companies are moving more functions and strategic responsibilities to their Hong Kong regional headquarters, reaffirming both the city's importance as a regional business hub and the value of the Asian market.

On the continued rise in the number of local offices from the Mainland, Mr Galpin believed these firms consider Hong Kong a great place for raising capital and for market testing. He added Invest Hong Kong will continue to persuade more Mainland companies to establish offices in the city.

On June 1, there were 1,252 regional headquarters, 2,328 regional offices and 2,817 local offices in Hong Kong representing parent companies outside the city. They employ a total of 354,000 people.

The US topped the list of countries/territories with regional headquarters as well as regional offices in Hong Kong, followed by Japan and the UK. The Mainland topped the regional offices list. The major lines of business are import/export trade, wholesale and retail, professional and business services, and finance and banking.

The companies surveyed found the simple tax system and low tax rate, free flow of information, corruption-free government, rule of law, and political stability and security as among the favourable factors for Hong Kong.

More than half of them thought the overall business environment in Hong Kong had remained the same or improved compared with last June, in spite of the difficult global business conditions and their effect on business perceptions.     -   2009 October 5    HK GOV'T

Despite the slower pace of rental falls and increased leasing activity, vacancy rates are climbing

Data from property firm Savills showed that overall Grade A office rents fell by 5.8 per cent in the second quarter of 2009. This is a slowdown from the decline of 11.1 per cent seen in Q4 2008 and 10.2 per cent in Q1 2009.

Savills Research now expects the rate of decline of Grade A office rents to slow over the second half of 2009 and record another 10 per cent slide for the remainder of 2009 before stabilising.

Knight Frank, which does monthly rental updates, noted that the month-on-month decline in the average Grade A office rent slowed to 1.9 per cent in July, after falling 3 per cent in June. Knight Frank expects that Grade A office rents will bottom out by Q4 of this year

'As the stock market has rebounded since early 2009, and mainland IPOs (initial public offerings) begin to make a comeback, we expect to see more demand from financial services in the coming months,' said Savills. 'Some international banks have already unfrozen headcount and are hiring selectively.'

But despite the slower pace of rental falls and increased leasing activity, vacancy rates are climbing. Hong Kong's Central area was the worst-hit district in Q2 2009 in terms of rents as well as vacancy.

As the banking, legal and financial centre of Hong Kong, the Central Business District (CBD) boasts the highest office rentals, and consists of about 13.4 million sq ft of Grade A office space. It alone accounts for 21.4 per cent of Hong Kong's overall Grade A office stock.

Data from CBRE showed that the overall vacancy rate for Grade A offices in Hong Kong averaged 9.7 per cent in Q2, down 7 basis points compared to Q1. In Q2 2008, the vacancy rate was 4 per cent.

The Central district fared worse. The vacancy rate for Grade A offices in Central averaged 5.2 per cent in Q2, down 24 basis points from Q1. Vacancy fell slightly over the quarter as there were some instances of positive take-up in the district over the quarter.

The decline in Central rents was also the most pronounced of all the districts, falling some 10.4 per cent over the quarter to average HK$75.30 psf. Rents in Central have on average fallen 43 per cent compared to the same period last year.

Landlords in the Central district have continued to adjust rents downwards in light of weaker demand for office space, as well as taking into account the rental disparity with other districts, CBRE said.

For the whole of Hong Kong island, negative take-up was seen in Q2. 'Negative take-up of 345,000 sq ft was recorded over the second quarter on Hong Kong island, largely as a result of companies reducing space requirements, handing back space to landlords, or relocating to lower cost buildings in Kowloon,' noted CBRE.

'However, some occupiers were noted to be upgrading from industrial or Grade B buildings over the quarter, attracted by low rents for newly completed buildings in Kowloon.'

Echoed Savills: 'Hong Kong's weak export performance is also affecting trading companies and prompting some to relocate to non- core areas to save costs.'

Among them are Sanyo Electronics which leased 47,300 sq ft in Kowloon Commerce Centre in Kwai Chung and Toshiba International Procurement which took up 14,000 sq ft in Manhattan Place, Kowloon Bay.

No new supply was completed in Q2, CBRE said. Pipeline supply for the remainder of the year will remain focused in areas such as Kowloon Bay and Kwun Tong, with several new buildings to provide about 700,000 sq ft upon completion before year-end.

Knight Frank also noted that while a rebound in rents had yet to be seen, the average office price had risen for five months running.

Knight Frank's data showed that month-on-month, Hong Kong's average Grade A office price climbed 1.4 per cent in July, following an 8.9 per cent growth in June.

Causeway Bay led the market, with prices rising 1.8 per cent, followed by Wan Chai and Tsim Sha Tsui, where prices went up by 1.7 per cent and 1.6 per cent respectively. The prices of some buildings reached new highs since the onset of the financial crisis. For example, a high-floor unit in Concordia Plaza in Tsim Sha Tsui was sold for HK$12,000 per sq ft - the highest level since September last year.

However, this means that the sales activity in the prime office market has slowed down, with the gap widening between asking and bidding prices. Around 270 sales transactions were recorded in July, down about 5 per cent from the previous month.  2009 September 22   BUSINESS TIMES


HK prime office rents second only to London

Office rents in Hong Kong's Central district are the most expensive in the world after London's West End, and the booming financial sector could push them even higher, property consultants Colliers International said yesterday.

At just below HK$960 (S$190) per square foot net per annum, Grade-A office rents in Central, the territory's financial district, are 35 per cent higher than a year ago. With no new supply becoming available this year, they are set to rise by another 15 per cent in 2007, Colliers said.

Rents in Central have recovered from a property market crash and economic recession triggered by the Asian financial crisis in 1997/98 but are still below their peak in 1994 when they topped HK$1,080 per square foot per annum.

Demand for space in the past year has been led by investment banks as the Hong Kong Stock Exchange became the most popular exchange globally for initial public offerings, drawing HK$342 billion in new listings in 2006. The territory has become a Greater China financial services hub and financial firms are also drawing robust business from foreign companies expanding in China.

UBS , Morgan Stanley , Lehman Brothers and Merrill Lynch all added office space last year while a number of overseas law firms either expanded or established a presence here, Colliers said.

Overall Grade-A office rents across the territory rose 21 per cent in 2006 to just below HK$720 per square foot net per annum, and are likely to increase by 10 per cent this year, Colliers said.

However, Grade-A rents in Tsim Sha Tsui, Causeway Bay and some other areas were virtually flat. Colliers expects the rent differential will encourage more non-financial companies to move out of Central this year. - Reuters    9 Jan 2007

HK prime office rents inch closer to 1997 highs
City centre rents up nearly 300% since 2003; firms looking to cheaper districts

Office rents in Hong Kong's central business district are nudging towards a 1997 high, forcing firms to shift out of their high-rise hubs to cheaper pockets of the city. Strong economic growth, a capital markets upswing and a limited supply of space in the Central district have seen office rents soar an average 5 per cent every quarter this year, with this trend expected to last through to the end of 2006.

Since the Sars low of 2003, office rents in the city centre have shot up by close to 300 per cent, putting the figure close to highs seen in the property boom of 1997 and not too far off those seen in the all-time peak of 1994.

Grade A offices have seen stellar rent increases in the first three quarters of the year: offices in demand such as the International Finance Centre, Chater House and Exchange Square have seen growth of 25 per cent since the start of the year, according to DTZ Debenham Tie Leung figures.

Sought-after addresses such as the iconic IFC 2 along the Central waterfront are leasing for up to HK$130 (S$26.15) per square foot every month, setting new records. The previous record for office rents was set in 1994 when space at Exchange Square was rented out at HK$121 per square foot. Although the current levels are not as high as those seen in 1997, 'they're getting there', says Piers Brunner, managing director at Colliers International (Hong Kong), explaining that Central is probably 15 per cent off the peak seen nine years ago.

'Demand is still healthy, particularly from financial institutions, banking, wealth management, fund management - and there's no new supply at the moment,' he said

With no significant supply expected to come up until 2010, there is also plenty of scope for more rent growth, he noted.

According to figures from Savills, office space in the city centre rose 18 per cent in the first half of the year. It anticipates a further growth of 10 per cent in the second half.

The rent surge is, however, beginning to bite into companies' bottom lines, forcing them to look for cheaper districts to locate their offices. While rents in Central averaged HK$104 per square foot in September, offices could be leased in North Point, a 20-minute train ride from the city centre, for just HK$25.3 per square foot.

'Some people find the rental cannot be justified, so non-core businesses are moving out,' explains Cathie Chung, associate director at Knight Frank's research department in Hong Kong.

With leases usually running for three years, many companies who negotiated cheap rent during the Sars crisis have had a rude awakening when their tenancies came to an end. 'It's a constant trend,' says Mr Brunner, citing examples of retail banking operations, media companies and other businesses that have been forced out of the central area to peripheral office locations such as Wan Chai and Quarry Bay.

The only development which may ease rent levels in Central is the estimated eight million square feet of office space expected to come on line by 2008 in other business districts such as Causeway Bay and Kowloon. - by Jane Moir     SINGAPORE BUSINESS TIMES    7 Nov 2006

Prime office rents up as demand grows

Growing tourism and improving domestic demand continued to drive Grade-A office rents higher last month, market watchers said.

Global real estate consultant Knight Frank said top-end rents rose 6 per cent to average HK$19.03 per square foot in July.

Rental growth was strongest in the core Central area with gains of almost 12 per cent for July.

`` Prime vacancies continue to fall and landlords are raising rents as a result,'' said Knight Frank's executive director Mark Bernard.

Knight Frank said leasing activity continued to focus on prime space in districts such as Central.

One of the larger transactions over the month was Sun Life Financial taking three floors in Exchange Square. The company will soon relocate from its offices in Paliburg Plaza in Causeway Bay.

``Investment activity appeared to pick-up slightly after levelling off over the past few months,'' Bernard said. ``An increase in transactions was noted in both Admiralty and Tsim Sha Tsui. Prices remained mostly flat.''

US-based investment firm Citigroup Smith Barney was also optimistic on the high-end office market.

``We reiterate our positive view on the Central Grade-A office market,'' said Citigroup's head of Hong Kong research YK Fu.

New supply is going to be tight for the next 4-5 years, while demand should continue to pick up with the improving economic conditions.''

Midland Realty (Holdings) forecast Wan Chai in particularly would see higher rents due to the proposed HK$4 billion Mega Tower planned for Ship Street by Hopewell Holdings.

``The proposed hotel should positively stimulate Wan Chai's office market and boost confidence of property investors,'' said the agency's senior sales manager Harry Chow, who revealed investors were currently eyeing a public tender of a commercial floor at Bank of East Asia Harbour View Centre.

A property investor had bought a unit in the building in March for HK$10.27 million, or HK$3,860 psf. The unit, on the 15th floor, measures around 2,660 sq ft.

The sales price was better than expected, said Chow.

The 20th floor being offered for bidding this time measures around 7,857 sq ft. Tenders will close on September 7.

Chow said he expected a ``pretty good response'' from property investors.

``With the proposed Mega Tower development and the projects launched by Urban Renewal Authority, I expect rental prices in Wan Chai will rise more than 20 per cent in the latter half year,'' Chow said.     - by Eli Lau    HONGKONG STANDARD       6 Aug 2004  

Financial sector fuels rise in Central office take-up

Grade A office space in Central and Tsim Sha Tsui recorded positive take-up for the fourth straight quarter, fuelled by robust demand from large financial institutions, a property consultancy said.

Central saw the strongest demand for GradeA office buildings, posting a positive take-up of 293,000 square feet in the second quarter, compared with a negative take-up of 305,000 sqft in the year-ago period, DTZ Debenham Tie Leung said yesterday. A positive take-up means vacancies have fallen.

``Despite having the Easter holiday in April, the new benchmark Grade A office building, Two IFC, continues to enjoy rapid take-up with a commitment rate of over 90 per cent to date, with a majority of tenants in the financial sector,'' consulting and research director Alva To said.

Lehman Brothers, Bank of America and Samsung committed to take 60,000 sqft, 39,000 sqft and 38,000 sqft, respectively, in the second quarter, DTZ said.

``As the economy continues to forge ahead, corporations are increasingly confident of earnings growth, thereby spurring demand for quality office space in strategic locations like Central,'' said David Watt, DTZ executive director for North Asia. ``The trend of recentralisation and consolidation, which has begun since late 2003, is still prevalent.''

Hewlett Packard, for example, relocated its headquarters from Island East to Central during the period. ``Benefiting from the implementation of Cepa and a strong export market, many companies in the trading and manufacturing sectors are looking to upgrade and/or expand their offices, leading to an increased demand for quality office space in Tsim Sha Tsui,'' Watt said.

Rents increased in all major districts except Island East in the second quarter, with a 20 per cent surge in Tsim Sha Tsui to HK$18 per sqft and an 8 per cent increase to HK$27 per sqft for Central office space. Rents in the Wan Chai/Causeway Bay area rose by 12 per cent to HK$19 per sqft. Island East was stable at HK$13 per sqft.

To estimated office rents in Central would rise 10 per cent for the latter half year, while those in Tsim Sha Tsui would rise around 5 per cent.   - by Eli Lau      HONG KONG STANDARD      7 July 2004

Rents at top offices to keep rising

Rentals for the Grade-A office market are expected to continue to rebound over the next couple of years in the face of falling supply and reviving demand, according to a hotel and property investor.

``Office supply in prime areas has been decreasing since early this year, especially in Central, where there will be a shortage of new office space in the next three years after IFC Two came on-stream,'' Great Eagle assistant director Adrian Lee said.

Lee said about 400,000 square feet of office space at AIG Tower in Central will become available next year. ``And then there will be no more new Grade-A office supply in the district until 2006-07.

``Since demand has come back, but because future supply will be below the average of the past 10 years, office rents must go up,'' he added.

Increasing demand for Grade A office space in Central was evident last month when ICBC (Asia) agreed to lease more than 100,000 sq ft of office space at Asia Pacific Finance Tower on Garden Road, Lee said.

Hong Kong's office market faced significant challenges last year.

Weak demand, coupled with substantial new office supply, drove overall market rents down as much as 30 per cent last year, Moody's Investors Service said.

The office market in Central - the location of most of the new supply - was one of the most hard-hit sub-markets.

However, take-up has improved and rental rates have been firming since the start of the year, following the upturn in both the Hong Kong and global economies, Moody's said.

The agency believes that the lower level of new supply expected in the coming two years and the business opportunities arising from the Closer Economic Partnership Arrangement (Cepa) between Hong Kong and the central government will provide support for office demand.

After three years of decline, the office leasing market has stabilised and rents are rebounding steadily, according to property agency consultants Jones Lang LaSalle.

A more obvious business expansion is expected to boost demand and rentals in the second half of the year, predicting office rentals would rise 25 to 30 per cent this year, the property consultant said.

Office rentals bottomed out in the fourth quarter of last year after a slide of more than 60 per cent since 1997.

Commenting on the retail property market, Great Eagle's Lee said the upturn in Hong Kong's retail rental market is being supported by consecutive periods of rising retail sales, fuelled in turn by the resurgence in local consumer spending and continued growth in inbound tourism.

Meanwhile, Jones Lang LaSalle has been appointed by the owner as the sole agent to conduct a public tender for Unit G10 on the ground floor and Unit B02 in the basement of 9 Queen's Road Central.

The premises have a gross floor area of about 17,455 sq ft, with a frontage of about 80 feet on Des Voeux Road, Central.

It is presently leased to Bank of America (Asia) with a term of 40 years, which guarantees stable rental income, and is perfect for long-term investment.

In comparison, the ground floor shop unit G04 of 9 Queen's Road Central, which faces Ice House Street, was sold for HK$48 million in February, representing an average of HK$48,000 per sq ft.

There is virtually no vacancy for top-tier shops in Central and the asking rent ranges from HK$200-HK$300 per sq ft.

Tony Lo, head of the investment department at Jones Lang LaSalle, said: ``Retail premises have long been investors' favourite picks due to their relatively stable yields and potential in capital appreciation, especially those strategically located and occupied by prestigious tenants, which are scarce and usually held by substantial developers or investors.

``With buzzing market sentiment following the better-than-expected land auction results and investment potential of these premises, we are sure it will be vigorously contested. In fact, a number of local and overseas investors have already expressed strong interest.''      - by Raymond Wang THE STANDARD    25 June 2004    

Rebound seen in sales of offices

There has been a revival in sales of office properties in Hong Kong as investors and occupiers pin their hopes on an end to a five-year deflationary economy, market analysts have observed.

Prices for grade-A offices reportedly rose more than 30 per cent from their bottom in June and were expected to grow steadily with demand rising, they said.

Chartersince Surveyors associate director Desmond Poon Chi-ming said buyers has recast their vote of confidence on office sales, betting on a market turnaround as the Hong Kong economy was recovering. The Closer Economic Partnership Arrangement (Cepa) has bolstered confidence in the growth of the Hong Kong economy, helping the city emerge from a deflationary cycle that began in November 1998.

It also had strengthened its role as a platform for bridging overseas funds into the China market, Chartersince said.

Last week, HSBC raised its Hong Kong gross domestic product growth forecast for this year to 6.5 per cent from 4.2 per cent, saying a stronger domestic sector and an anticipated robust trade picture were likely to drive the economy.

Midland Realty commercial sales director Daniel Wong Hon-shing said investors and occupiers had been returning to the market since the end of the third quarter.

Sales transactions of grade-A offices, such as Lippo Centre and Bank of America Tower, in the second half are expected to go back to the level achieved in the same period in 2000.

Investors had hoped for a sector rebound about three to four years ago in the wake of the dotcom boom. However, office values, following a short-lived rebound, slumped following the bursting of the dotcom bubble, the terrorist attacks on the United States on September 11, 2001, and the Iraq war.

The Sars outbreak in the second quarter further dampened average prices of grade-A offices, which fell to 75 per cent below 1997 levels.

Agents said the recent rise in capital values of residential units and street shops also encouraged investors shifting towards more lucrative office properties.

Cheng Kai-bill, the commercial department general manager at Centaline Property, said: "Some investors who have missed the chance of buying street shops have shifted to the office sector."

They were active in buying foreclosed office properties in the past few months, Mr Cheng said.

A foreclosure sale involves selling a property after the owner has failed to make mortgage payments. They are usually sold below market prices.

According to Chartersince, the number of foreclosed offices for sale have declined since August. Banks offered 156 foreclosed offices for sale last month compared with 168 in August.

Landlords started raising prices after the wave of foreclosure sales ended, agents said.

Office space at the grade-A Lippo Centre had fallen to its lowest at $3,000 per square foot during Sars but the transaction price recently rose more than 30 per cent to $4,600 per square foot.

This returned to levels at the end of last year but was still well below $15,000 per square foot achieved in 1997, Mr Poon said.

Looking ahead, estate agents said they were optimistic on the outlook next year as the economy's future appeared rosier than it had been in the past six years.

Simon Wong, research director of Colliers International, said the recovery of office rentals would attract more investors in the sales market.

"Provided the GDP growth rate turns out to be what some analysts predict at 6.5 per cent next year, I expect next year's rental growth to possibly reach 20 per cent for the full year," said Mr Wong.

He said it was the right time to enter the sales office market, which he said was still turning the corner.    -- Peggy Sito    South China Morning Post      10 Dec 2003

HK developers face consolidation

A further deterioration in the Hong Kong property market this year is likely to put small and medium-sized developers under pressure and trigger consolidation in the industry, property consultants Insignia Brooke said yesterday.

'Some small and medium-sized developers might not survive in 2003,' Nicholas Brooke, a consultant at Insignia Brooke, said. 'I think the banks will get tougher with them and they will be absorbed by larger players and the big (developers) will get bigger.'

The pressure of declining asset values on small and medium-sized developers with a mix of residential and commercial property in their portfolios will be particularly intense, he said.

Insignia Brooke forecast that prime office rents in Hong Kong, which are still among the most expensive in Asia but have been hit by layoffs in the finance industry as well as oversupply, would fall 15-20 per cent this year and be cheaper than those of Singapore and Beijing by the end of 2003.

Prime office rents in Central averaged HK$28 per square foot by the end of 2002, still 14 per cent higher than rents in Singapore, 19 per cent above Beijing and 57 per cent higher than comparable rents in Shanghai, Insignia Brooke said.

But with Nomura Group widely reported to have recently leased space in Hong Kong's newest prime office block, Two International Finance Centre, at HK$20 per square foot or below, once rent-free periods and other incentives are accounted for, Insignia Brooke forecast that pressure on rents will intensify.

Oversupply, along with high unemployment and a sluggish economy, is also driving down residential property prices. They have tumbled by up to 65 per cent since late 1997 and are expected to fall another 10 per cent this year. - Reuters

Monthly rentals for grade A office space in Central may drop to below HK$10 per square foot as landlords of new buildings compete for tenants, according to an investment bank.

CLSA said in a research note Nomura had signed a deal to lease three floors, or 65,000 square feet, of Two International Finance Centre (Two IFC).

It believed Nomura - the first tenant of the harbour-front skyscraper - leased the space at an effective rent of between HK$15.50 and HK$17 per square foot a month.

The tenancy deal follows the Hong Kong Monetary Authority's (HKMA) agreement to buy floors 55 and 56 and floors 77 to 88 of the office tower for HK$3.7 billion.

While the owners of the skyscraper still have 73 floors to be leased out, Hongkong Land - the biggest landlord in the core business district - has 11 floors left to lease at 11 Chater Road, according to CLSA.

``We believe rents will get to single digits in grade A Central as Two International Finance Centre and Hongkong Land are forced to make capital contributions for fit-outs which at HK$18-25 per square foot [amortised over five years] are now the same as the rents,'' the note said.

CLSA expects Great Eagle, which owns Citibank Plaza, to continue facing pressure - Nomura is occupying two floors at Citibank Plaza, while the HKMA will vacate seven floors when it moves to Two IFC.

The grade A office market in Hong Kong has been badly hit from the increasing supply as new buildings are coming to completion.

International property consulting firm DTZ Debenham Tie Leung estimates about 7.6 million square feet of new office space, including those at Chater House, Two IFC and AIG Tower, will come on the market by the end of 2005. DTZ predicts a 14-17 per cent drop in grade A office rentals this year and expects the market will continue to bump along the bottom until global financial markets improve.

Another international real estate consulting firm, CB Richard Ellis, said last month the grade A office market would suffer a rental drop of as much as 15 per cent this year because of abundant supply of new office space.

Grade A office rents fell 25 per cent in the first 11 months last year, with the vacancy rate rising from 7.7 per cent to 9.4 per cent, it said.  -11 January 2003   Hong  Kong Standard

Office rents to fall 15pc, vacancies rise
Grade A office rentals are expected to fall a further 15 per cent this year while vacancy rates in the core business district will rise sharply due to abundant new supply, an international consultant said.

Colliers International said Grade-A office vacancy rates will increase from 10.5 per cent to 11.9 per cent in the coming 12 months while the vacancy rates in Central will rise sharply.

``Vacancy rates in Central will surge to a maximum this year, from 11.2 per cent at the end of December to about 16 per cent this year,'' research manager Simon Lo said. ``Rents in the area will drop by about 18 per cent, which is higher than the fall in the overall Grade-A office market.''

A significant new supply of office space will come available when Two International Financial Centre is completed in the third quarter this year, providing 1.82 million square feet of new space.

Lo said the fall in office rents in Central would continue to narrow the rental gap between Central Business District and decentralised areas, which may stimulate companies to upgrade or move into offices in the CBD.

Grade A office rents in Central are now about HK$26 to HK$28 per square foot.

In the luxury residential market, Colliers said rents and sale prices would fall 3 to 5 per cent this year while sale transactions could increase 4 per cent.         - Nicole Kwok  Hong Kong Standard   21 January 2003  

                                                      

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