Consulates shy away from high office costs

PUBLISHED : Monday, 30 June, 2008, 12:00am
UPDATED : Monday, 30 June, 2008, 12:00am

Envoys consider cutting space or moving amid rent rises, some up an 'immoral' 250pc

Companies are not the only ones staring down the barrel of rising commercial property costs - sources at several consulates say they are considering reducing the size of their offices or moving to cheaper buildings to battle rocketing rents.

The Japanese consulate leases two floors of One Exchange Square in Connaught Place, but may reduce the size of its Central office in the next two years, a consular source said.

'Hong Kong's real estate prices are rising rapidly,' the source said. The decision to reduce space 'is not final, but it's very likely'.

The Austrian consulate leases space in Chinachem Tower in Connaught Road, but a source said it would not be there when the lease expired next year. 'We're lacking space, and we're intending to move,' the source said. The move to a bigger office meant a move to a building 'a little less centrally located'.

'This is because of price, of course. We should not increase our rental expenditures too much in comparison to what we are paying.'

Last year, the Polish consulate moved from Pacific Place in Admiralty to Wan Chai. The landlord had wanted to raise the rent 250 per cent, consul general Ryszard Jacek Potocki said. 'I thought it was immoral and personally decided to leave the place,' said Mr Potocki.

He said he had heard grumbling from many colleagues at other consulates about the situation. 'They are very unhappy because of the rising rents,' he said.

Pierre Wong Tsz-wa, chief executive at Midland Realty's investment, commercial and industrial department, said office rents had risen by up to 70 per cent over the past year and many tenants could not accept such a big increase.

'The rent in Hong Kong is not extreme if compared with that of London and New York, but other than consulates, many companies have chosen to move to cheaper locations,' he said. 'They can't afford their existing offices but they can certainly afford moving to an area further from the central business district. People would still make a trip to a consulate located far away from the city centre if they had to.'

An official at InvestHK, the government's investment promotion agency, said companies were still interested in space despite high rents.

'When a space opens up there often are several companies wanting to take it up,' Mark Michelson, associate director general said.

'They [the high rents] may be keeping some companies away. All I'm saying is that demand is very high.'

Maurice Tse Kwok-sang, associate dean of the University of Hong Kong's faculty of business and economics, has a solution to the problem: the government should allow businesses to relocate to unused sites in the northern New Territories.