Yields on offices fall but residential and retail up

PUBLISHED : Wednesday, 01 December, 1993, 12:00am
UPDATED : Wednesday, 01 December, 1993, 12:00am

YIELDS on Hong Kong office properties continued to fall between May and November, while those for the residential, industrial and retail sectors increased, according to data obtained exclusively by Property Post.

A comparative survey by Brooke Hillier Parker (BHP) on 12 Asian property markets, due for release early next year, will show that office yields in the territory have remained low by historical standards, and may slide further in the buoyant market to below six per cent.

''With rents roaring ahead, some very heady prices have been paid for office property and some investors have even taken yields below five per cent,'' said David Faulkner, the BHP partner responsible for research.

With rents predicted to continue to climb at least until 1996 because of little supply coming on stream, that confidence was justified, he said.

The relative frequency of rent reviews in Hong Kong - usually every three years, compared, for example, with as much as five or six years in London - meant that despite the low initial return office property still constituted a sound investment.

Office rents had climbed by 30 per cent this year, Mr Faulkner said.

The banks had been as cautious on lending to would-be buyers of office space as they had to residential buyers, he said.

This meant rental growth was expected to remain higher than capital value growth.

In addition, the forthcoming report would also indicate that ''our friends north of the border have been not nearly so active in the second half of the year, as compared with the first half'', Mr Faulkner added.

''We view this as a short-term phenomenon only, coming about largely as a result of the mainland's austerity drive.'' The most recently published BHP Asian property market survey was dated October 1993, but the data related to the period only up to May 1.

The report provided a comparison of property rents, prices and yields in 12 Asian cities.

Office yields increased in four cities in the first half of 1993, led by Kuala Lumpur with a rise from eight per cent to 10 per cent.

Jakarta, Sydney and Singapore increased by 0.5 per cent.

Bangkok and Hong Kong office yields were static, with only Taipei and Manila registering decreases.

Retail yields fell by one per cent in Bangkok, Jakarta and Hong Kong, by 0.5 per cent and 0.2 per cent in Manila and Taipei respectively, while Singapore was static.

Sydney saw a 0.5 per cent rise, and Kuala Lumpur two per cent.

Changes in industrial yields were mixed, with Bangkok, Sydney, Manila and Jakarta all rising, and Hong Kong and Taipei falling.

Kuala Lumour and Singapore were unchanged.

Residential yields saw rises for Bangkok, Kuala Lumpur and Jakarta. Manila, Hong Kong and Taipei fell.

Overall, the trend was for rising yields in Bangkok, Kuala Lumpur, Jakarta and Sydney reflected current or anticipated oversupply. Stable yields in Singapore and decreasing yields in Hong Kong, Manila and Taipei, reflected their strong or recovering markets.

For prime office rental values, Hong Kong bucked a widespread regional trend by recording a further rise, to an average of US$69 per square metre per month.

Tokyo remained by far the most expensive city in the region at US$127 per square metre per month, despite crashing by 40 per cent since November last year as landlords finally acknowledged their tenants strong bargaining position as vacancies continued to rise.