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
