Central office rents reach record high
The grade A office leasing market saw a mixed performance in the first quarter, with Central enjoying the fastest pace of rental growth while rents in fringe areas consolidated, according to property consultant DTZ Debenham Tie Leung.
Against the backdrop of a burgeoning economy with positive business prospects, especially in the financial sector, robust demand and tight availability has sent Central's average net effective rents to a record HK$85 per square foot, an increase of about 10 per cent during the first four months.
This was the 14th consecutive quarterly growth.
Districts such as Wan Chai/Causeway Bay and Tsim Sha Tsui saw only moderate rental growth of 3 per cent, with net effective rents in the first quarter at HK$38 and HK$31 per square foot, respectively.
Rents in Island East remained stable at HK$27 per square foot in the face of 1.81 million square feet of new stock arriving soon, according to the property consultant.
'As a result, we have revised upwards our rental forecast for Central to between 15 and 20 per cent for 2007, while that of other fringe districts will remain relatively stable, or even decline towards the end of the year when more completions come on to the market,' said Alva To, a director of consulting and research at DTZ.
'The grade A office market in the first quarter remains driven by [finance, insurance, real estate and other professional services], with hedge funds and investment banks being the main drivers in the wake of the booming equities market,' he said.
Vacancy rates had recorded the largest quarterly drop of all districts of 0.8 percentage point, going from 4.5 per cent in the fourth quarter of last year to 3.7 per cent in the first quarter this year, said Brian Brenner, a director of DTZ's global corporate services.
The office take-up rate in Central increased 85 per cent year on year to 204,000 sqft, due to new completions such as York House and 100 QRC, which have helped alleviate part of the supply pressure within the district, and are now 90 per cent leased.
Island East office rental in HK$ per square foot: 27