Central landlords get tough
Net effective grade-A rents in Central are firming as landlords become less willing to make further concessions, agents and analysts say.
'The big landlords in Central have drawn a line in the sand,' said Simon Smith, research director with FPDSavills. 'They have locked up their rents and I don't see any further downside to net effective rents.' Simon Lo, head of research with Colliers Jardine agreed that Central landlords were getting tougher, either holding the line on rent-free periods or, in some cases, cutting back on them.
Analysts and agents said the main reason for the tougher stance was that occupation rates in new buildings had reached satisfactory levels.
They said 60 per cent of the space in Hutchison Whampoa's Cheung Kong Center had been committed, with leases signed.
Analysts said asking rents at the development were about $45 per square foot on the letable space, with rent-free periods varying depending on the length of lease and the amount of space taken.
They said the face rent was $43 per sq ft at Sun Hung Kai Properties' One International Finance Centre (IFC), and the building was 50 per cent let.
Landlords also were getting tougher because the free-fall in rents, which averaged 6-8 per cent a month in the middle of last year, had slowed, agents said.
However, Mr Smith said he expected office rents throughout Central and Hong Kong Island to remain soft for the rest of the year.
'We saw seven million sq ft come on to the market last year and another four million this year, and there is another 1.3 million coming in 2000,' he said. 'Rent-free [periods] will be with us for some time, until there is a turnaround.' Mr Lo said Central landlords would have to cut rent-free periods out entirely before there could be an increase in rents. Grade-A office rents in the area could begin to rise next year.