The costly title we can do without

PUBLISHED : Saturday, 12 August, 1995, 12:00am
UPDATED : Saturday, 12 August, 1995, 12:00am

HONG KONG has lost one world crown it will be very happy to see the back of.

No city ever wants to be hyped as the most expensive city in the world to locate an office.

On the positive side, it is a signal of a city's economic success. But more importantly, it sends international companies looking to locate to the region running scared.

Richard Ellis' latest biannual survey of real prime office rents shows the gap between Bombay and Hong Kong at the top of the table widening.

Total monthly costs of Grade A space in Hong Kong were said to be US$11.38 per square foot, inclusive of service charges, rates and property tax as of June 30 this year, compared with US$14.78 sq foot in booming Bombay.

As far as most Hong Kong businessmen are concerned, Bombay is welcome to its new-found claim to fame.

Even Hong Kong's money-hungry property developers concede that the recent correction has been healthy for the overall good of the territory.

If the territory is allowed to become uncompetitive, its whole economy will ultimately suffer. Over-inflated property market bubbles also have a tendency to burst.

Hong Kong's saviour has been a looming glut in supply of new space, thanks largely to its wealth of land reclamations.

An ever-growing resistance by tenants to landlord's exorbitant rental demands has also played a significant part.

With the inherent political uncertainty surrounding Hong Kong's transfer of sovereignty to China in 1997, the last thing the territory needs is over-inflated office rents as another excuse for international firms to locate elsewhere in the region.

Bombay suffers from similar problems to Hong Kong and Singapore in that it is essentially an island. When you run out of land, there's no other choice than to either redevelop higher or reclaim land - both options are expensive.