Central office rents recovery forecast

PUBLISHED : Friday, 16 July, 1999, 12:00am
UPDATED : Friday, 16 July, 1999, 12:00am

Effective rents for prime Central offices will rebound 30 per cent next year as landlords cut incentives amid a decrease in supply, according to property consultant Cushman & Wakefield.

Richard Middleton, director of research and advisory services, said effective rents in Central stood at $26.82 per square foot a month on net usable area.

They would bottom out at about $25 per square foot this year and rebound 30 per cent next year to the $32 level due to cutbacks in leasing incentives, he said.

For example, rent-free concessions in new leases were expected to be cut from about nine to three months.

However, Mr Middleton said headline rents in Central would remain at about $35 per square foot and were unlikely to see growth until 2001.

Effective rents, based on 'carpetable', or net usable area, factored in concessions such as rent-free periods and other occupancy costs.

Mr Middleton said further rental rises were expected in 2001 and 2002 but rents by then would still be 15 per cent lower than at the end of 1997.

Offices in Central and eastern Hong Kong Island recorded marginal pick-ups of 1.2 per cent to 2.5 per cent in rents last month.

While 3.8 million square feet of new grade-A offices are expected to come on stream this year, he said take-up would match completions.

Supply would fall significantly in the next three years and demand would exceed new completions which would fuel growth in rents.

Mr Middleton expected vacancy rates for prime Central offices would drop from 17 per cent to 12 per cent next year and to 10 per cent in 2001 and 2002.