Grade-A office rent keeps rising
Rental rates of top-grade office space will continue to increase in the next four years as demand remains strong and possible delays hit new supply, according to investment bank Salomon Brothers.
Property analyst Michael Green said net take-up for grade A offices would remain high, lowering the vacancy rate.
He said new top-grade office supply would reach 4.27 million square feet this year and 6.35 million sq ft next year. Net take-up, which was expected to absorb the supply, would reach 4.01 million sq ft this year and 5.99 million sq ft next year.
With the strong take-up, the vacancy rate is estimated to decline from 8.3 per cent this year to 7.8 per cent next year. Mr Green said the vacancy rate would continue to drop to 5 per cent in 2000 as net take-up in 1999 and 2000 would surpass new supply.
His optimism is in contrast to some analysts' concern over the large number of offices being built.
A number of huge office developments will be completed in the next two years, including the 1.27 million sq ft The Centre - a joint venture between Cheung Kong (Holdings) and the Land Development Corp - and the 1.21 million sq ft redevelopment on the former Hilton hotel site. Even more supply will come on stream when the immense commercial development above the Central airport railway station is completed.
Mr Green said the market was underestimating the net take-up, which would be boosted by pent-up demand, cumulative employment in the financial and business services sub-sector, acceleration in the mainland economy and increases in new immigration.
He said possible delays in new supply could result in a decline in vacancy and estimated office rents would increase between 10 and 20 per cent in the next four years.
