Central building sold for HK$4.88b

PUBLISHED : Wednesday, 09 May, 2012, 12:00am
UPDATED : Wednesday, 09 May, 2012, 12:00am

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A consortium led by National Electronics has made Hong Kong's biggest sale of office space this year.

The sale of the new grade A office building in Central for HK$4.88 billion is also the largest investment deal this year, and the cost is the highest per square foot yet achieved.

The 28-storey 50 Connaught Road Central building has a total gross floor area of about 175,000 sq ft. That means the buyer spent about HK$27,888 per square foot, beating the previous record set in February last year when the 20th floor at No 9 Queen's Road Central in Central sold for HK$27,507 per square foot.

National Electronics, which owns 20 per cent of the property, said the deal was slated for completion on June 25. A breakdown of the rest of the consortium was not available at press time. It is understood that Apollo Global Real Estate Management co-developed the building, which was completed in the second half of last year.

Market insiders are speculating that the building's buyer is the Agricultural Bank of China, which will reportedly keep part of the office space for its own use. The bank could not be reached for comment.

Property agents say the building's occupancy rate stands at about 75 per cent, with office rents of HK$90 to HK$130 per square foot.

The office floors available for lease are mainly upper floors.

The initial rental yield of the building is about 3 per cent, rising to 4 per cent if the building is fully let, property agents say.

Kent Fong Chi-kit, co-head of investment at realtor Cushman & Wakefield says the office market is strong enough to shrug off the uncertain global economic outlook. 'The building is the only en-bloc grade A office building in Central available for sale and offers an attractive rental yield,' Fong said.

'It is attractive to investors and end-users.'

However, other property agents are more bearish and don't believe that the new record deal will improve sentiment in the office investment sector.

'The office investment market has not been active recently,' said an agent. 'The market has recorded only a few transactions. Most investors are looking for retail properties, which have higher upside rental potential.'

Simon Lo Wing-fai, executive director of Asia research and advisory services at Colliers International, says the office market has nevertheless performed better than expected.

'Early this year, we believed that office rents in Central would drop 15 to 20 per cent in 2012, and would bottom out in the fourth quarter,' Lo said. However, we now believe rents will bottom out as soon as the third quarter, thanks to increasing demand from mid-sized firms. Office rents in Central have dropped 8 per cent so far this year.'

$123m

The amount, in HK dollars, National Electronics paid for a 20pc stake in three buildings remade into 50 Connaught Road Central