Foreign firms cut back space needs

PUBLISHED : Wednesday, 26 September, 2001, 12:00am
UPDATED : Wednesday, 26 September, 2001, 12:00am

Average office floor area taken up by foreign companies has been on the decline in recent years, according to Colliers Jardine.

The property consultant said the overall demand for grade-A office space depended on two variables - the number of foreign companies in Hong Kong and the average floor area requirements of each firm.

It said the total number of foreign companies had been on the rise over the years. In the six years to last year the number of foreign companies rose to 6,093 from 3,956, representing a compound growth of 7.5 per cent.

But there was a decline in average floor area take-up by each of these firms. Colliers Jardine said the average floor area take-up for foreign firms before the Asian crisis was in the range of 8,955 square feet to 9,526 sq ft.

This slipped significantly after the crisis in late 1997. At the end of last year the average was 8,288 sq ft.

A continuing trend of mergers and acquisitions reflected in the reduced number of sizeable multinational corporations in the market.

By the end of last month, the number of foreign companies in Hong Kong was 6,326 - indicating that by the end of the year it would be 6,383 firms, Colliers Jardine said.

If the average floor area per company was to drop by another 5 per cent, to 7,879 sq ft, the total occupied floor area in the grade-A sector was estimated at 50 million sq ft, it said.

This indicated that by the end of the year overall office vacancy might be in the double-digit range, compared with the 8.7 per cent vacancy rate at the end of last year.

The industrial property sector's performance was uninspiring with the continued weakness in the office sector and a decline in trade volume.

Rentals for factories posted a decline of 3 per cent last month, compared with the level three months ago, it said. Industrial-office sector rentals dropped 3.6 per cent in the same period.

The performance of warehouses was mixed. New premises with value-added facilities, such as logistics functions, were more resilient. But, the average rental for warehouses decreased 1 per cent.

It expected that factory rentals faced the greatest downward pressure and, while the warehouse sector largely would be steady, the industrial-office and factory sectors would be more vulnerable to any further economic deterioration.