Prime office rents slide further
Updated: 2012-09-26 08:28
By Li Tao(HK Edition)
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Top-quality office buildings are situated in Central. The city's prime office rents continue to show a downward trend in the third quarter as investment banks and professional services providers are pulling back amid the gloomy economic outlook. Jerome Favre / Bloomberg |
Top-grade office rents fall 22.6% in Q3 from highest level in 2008
Top-grade office rents in the city's prime business center extended their slide in the third quarter, with the average rate slumping 22.6 percent from its peak level in 2008 as investment banks and professional services providers are pulling back amid the gloomy economic outlook, according to data compiled by property consultant DTZ.
The average rent in the most prestigious office buildings in Central and Admiralty, including Two International Finance Centre and Cheung Kong Centre, which are primarily occupied by financial, insurance, real estate and business services sectors, stood at HK$130 ($16.77) per square foot in the current quarter of 2012, down from the HK$131 per square foot in the previous three months and the previous peak of HK$168 per square foot back in 2008, DTZ data revealed.
Office rents in Central and Admiralty - the only area in Hong Kong that recorded contraction this quarter - has slid over the past 12 months since the end of 2011, according to DTZ. Average office rents within the area was recorded at HK$106 per square foot in the third quarter, down from HK$107 in the second quarter and the peak of HK$122 in 2008.
Companies in Central remained cautious today and sought to keep operating costs at a low level. Apart from decentralization, staff cuts in financial and business related sectors also impacted the take-up of offices in the area, the property consulting firm added in the report.
Take-up in the prime area dropped over 38,000 square feet in the third quarter after tepid gain of 5,700 square feet in the previous three months. Average vacancy rates of the buildings in Central and Admiralty has reached 6.6 percent this quarter - the highest area throughout the city - surging 5 times over the 1.1 percent recorded back during the peak in 2008.
The relatively high vacancy rates in Central and Admiralty have also driven the landlords to reduce rentals to retain the tenants, said Mark Price, DTZ's head of business space in north Asia. Price added that financial institutions particularly jobs cuts among investment banks had become prevalent this year due to unfavorable business performances.
Daiwa Securities Group Inc, Japan's second-largest brokerage, said this week that it will shed as many as 50 derivatives jobs in Hong Kong and may further shrink investment banking and equity research in the city in a bid to save costs. Deutsche Bank, Germany's biggest lender, is also reportedly trimming 70 staff at its Hong Kong equities operations this month.
However, office rents in Central and Admiralty are likely to be supported by business expansions of mainland companies, which continued to set up office in Hong Kong. Some of those which already have representative offices in the city are still looking to upgrade their operation as well as the scale of office, and the prime Central and Admiralty area is their primary choice of office locations in Hong Kong, according to DTZ.
As overall office market remains buoyant in Hong Kong, Price estimated that rental prices in Central and Admiralty will stabilize in the fourth quarter this year.
litao@chinadailyhk.com
(HK Edition 09/26/2012 page2)