Office rental slump reported in Admiralty
Rents for top-grade offices in some parts of Hong Kong have been cut by up to 20 per cent as the global financial crisis hits landlords in the city's commercial heartland.
Admiralty has been particularly affected by the downturn, as most office floors are owned by individuals, who have less bargaining power than developers. Peter Chan Suk-chung, a director for the office market at Centaline Properties, said that following the collapse of Lehman Brothers in the US last month many individual owners in Admiralty had cut rents on vacant offices by 10 to 20 per cent.
Mr Chan said the average rent being sought for vacant offices in the Lippo Centre, a grade A office building in Admiralty, last month was HK$50 per sq ft but it had since dropped to HK$45.
Despite the lower asking prices, potential tenants remained cautious amid the global uncertainty.
Kenny Kwok Hon-chiu, an associate director at Midland IC&I, said many individual owners in the district had reduced rents by 5 to 10 per cent over the last two weeks as they were keen to lease their properties.
'A few owners are willing to cut rents further,' he said.
A 1,700 sq ft office space at Lippo Centre 2 was going for HK$50 per sq ft in April. But the owner could not find a tenant and had cut the rent several times to HK$38 per sq ft.
According to Midland, a 2,125 sq ft office on the 35th floor of the Bank of America Tower was last week being rented for HK$46 per sq ft.
That is 17 per cent lower than another space on the seventh floor leased in the middle of September.
'Many investors bought office space in Admiralty for short-term investment in the last quarter of last year. However, they failed to find buyers because of the uncertain economic outlook,' Mr Kwok said.
'They then decided to find tenants instead of buyers but as the supply in the leasing market increased, they have had to cut rents.'
In Central, property agents said landlords had not cut rents by the same margin since the vacancy rate remained low.
Colliers International research director Simon Lo Wing-fai said the average rent in Central had dropped 0.4 per cent in August, signalling that growth in the office rental market had come to an end. The firm expects office rents in Central to drop by 15 per cent in the coming 12 months.
In Tsim Sha Tsui, Kelvin Li, a director at Midland IC&I, said the rents in the district had dropped by 10 per cent since last October.