Slowdown unlikely to burst prime office rent-growth bubble
A considerable slowdown is not expected to stop rentals for prime offices rising up to 25 per cent.
Property consultant Cushman & Wakefield said this year's rental growth would be much slower than last year's phenomenal 110 per cent effective increase.
However the consultant's Hong Kong managing director Greg Harris said a tight market for prime office space combined with limited new supply would continue to put upward pressure on rents. This was despite a significant slowing in demand after the dotcom fallout.
Some companies had also released surplus space, some of it in the best office locations, after merger and acquisition - particularly in the banking sector.
Another factor contributing to a slowdown is the uncertainty surrounding the United States economy.
The property consultant said demand for office space declined in the fourth quarter last year but the absorption for the whole year was still 2.8 million square feet, up 61 per cent on 1999.
But supply is still tight.
The vacancy rate of grade-A office space on Hong Kong Island has dropped from 17.8 per cent at the end of 1999 to 8 per cent at the end of last year.
The rate in core Central was even lower at 4.8 per cent, with new supply limited until the middle of next year.
Mr Harris said the company was expecting rents to rise 20 per cent to 25 per cent this year.