The retail property sector may be booming, but the outlook for grade-A office rents in Central is bleaker, with analysts predicting global uncertainty triggered by the euro-zone sovereign debt crisis to push rentals down in the second half as corporates migrate to cheaper areas of Hong Kong.
A Cushman and Wakefield study found that grade A office rents in the greater Central area - spanning Sheung Wan, Central and Admiralty - dropped 1.5 per cent quarter-on-quarter, 'a slight recovery' after dropping more than 9 per cent in the first quarter.
Cushman and Wakefield executive director John Siu expected rents in greater Central to fall by up to 10 per cent in the second half, saying the fall could be bigger if the euro-zone crisis worsens.
Siu said demand for bigger areas - those of more than 20,000 sq ft - remained weak in greater Central, and companies were still trying to save on rent, reflecting 'sustained conservatism among banking and finance tenants' because of Europe.
Thomas Lam, head of Greater China research at property consultant Knight Frank, also predicted that rents in Central would drop 5 per cent in the second half. Lam said many offices in Central had been occupied by investment banks and other financial institutions, some of which decided to move to cheaper districts during the first half.
Vacant office space in Central stands at an estimated 800,000 to 900,000 square feet, but new demand remains weak because multinationals are also limiting expansion in Hong Kong due to global uncertainty.