Slowdown reflects in pace of rental declines
The rate of downward adjustment in prime office rents has accelerated in the past few months as economies have consolidated worldwide.
Colliers Jardine said grade-A office rents had been coming off since the end of February.
From March to the end of June, average monthly office rent in Central fell 8 per cent to HK$49.8 per square foot. Admiralty followed the same trend with the average rent decreasing 6.2 per cent to HK$43.3 per sq ft in the period.
Office rents in fringe and decentralised locations had been more resilient.
These refer to well-located properties with large floor plates and a monthly rental bracket below HK$20 per sq ft on gross area.
Colliers Jardine said the average rental price tag remained at a steep discount of 60 per cent, compared with the monthly average of HK$49.8 per sq ft for Central.
Rental growth of this group of decentralised grade-A office buildings had basically lagged the average in the central business district during the past upswing.
As a result, they were more stable during the prevailing course of adjustment, particularly as 'distressed' occupiers migrated to cheaper alternatives, the consultant said.
In North Point, the average rental rate had been quite steady at about HK$29 per sq ft a month.
Chesterton Petty said the sluggishness of the office-leasing market lingered last month and transactions primarily involved smaller offices.
Last month saw an increase in lease surrenders as a result of continuing consolidation in the dotcom sector. Central and Wan Chai led other business areas with potential surrendered space of 60,000 sq ft and 40,000 sq ft respectively, followed by North Point, Quarry Bay and Sheung Wan.
Chesterton Petty said that while a mild decline in rentals was recorded last month, the overall vacancy rate improved slightly to 7.2 per cent from 7.5 per cent in June.
But the leading vacancy rate, in Sheung Wan, grew seven percentage points to 24.1 per cent during the month.
For the remainder of the year, the consultant expected office rentals to decline at a slower pace.
It said the overall office sales market was more robust with improved sentiment, although grade-A office sales last month remained subdued.
Under the low interest-rate environment, local investors were actively looking for investment opportunities among grade-B buildings which offered bargain prices, high occupancy rates and attractive yields.
Eight grade-B buildings were sold last month with a total value of HK$3 billion.
But the full recovery of the office-sales market remained some distance down the road.
The Bank of China Group bought the whole block of Olympian Tower in Olympic Station, Tai Kok Tsui, for HK$1.09 billion in the biggest deal recorded recently.