Top office space sees rents jump in third quarter
Hong Kong's grade A office market witnessed remarkable growth in rents during the quarter from July to September as leasing demand was supported by a positive business atmosphere, according to international property consultant DTZ.
The five most expensive buildings in Central and Admiralty in terms of rent, including IFC One and Two and the Cheung Kong Center, showed the biggest quarterly gain in net effective rent per square foot per month (i.e., after deducting discounts and incentives), which rose 14.7 per cent from HK$109 to HK$125. The growth was helped by the expansion of the finance and insurance sectors.
Alva To Yu-hung, DTZ's head of consulting for Greater China, said companies in the finance, insurance and real estate sectors were again behind most of the activity in Central and Admiralty.
'The trend by corporations to establish or expand regional headquarters or representative offices in Central and Admiralty underpinned the demand for office space in the district,' said To.
The rise in rentals was generated by a big increase in space taken up in new lease agreements - up 118.58 per cent for the quarter from 52,767 sq ft to 115,338 sq ft.
Mark Price, DTZ's head of business space, Greater China, said evidence of increased demand for space in the area encouraged landlords to be more aggressive in their asking rentals.
'Some of the quality buildings in Central and Admiralty are now being marketed at asking rentals as high as HK$160 per sq ft per month, whereas in the second quarter the range of asking prices was between HK$130 and HK$140.'
The average monthly rent for grade A buildings in Central and Admiralty rose for the quarter by 11.6 per cent to HK$96 per sq ft, widening the gap with rents in the eastern side of Hong Kong Island, which had a quarterly growth of 7.4 per cent, to HK$29, according to Price.
'At HK$96 per sq ft per month, current rentals in Central and Admiralty are still 21.3 per cent short of their peak level of HK$122 per sq ft per month in the second quarter to the third quarter 2008,' said Price. But rents had rebounded to levels reached in the first quarter of 2009 before they began a retreat.
But comparing the figures of the third quarter with those of the first quarter, growth in most districts and across all categories had already ranged between 8 per cent and 19 per cent, it noted, with office rents in Kowloon East up by 20 per cent.
After this strong growth, however, DTZ expects a short-term consolidation. 'After a robust third quarter, we expect the market will enter a period of consolidation in the fourth quarter, with less business activity towards year-end,' To said.
'Nevertheless, given steady economic development, we expect to see more robust growth in rental in 2011, as business demand in Greater China and the Asia-Pacific region continues to increase.'
The usual suspects
Insurance, finance and real estate activity led the increases
Space taken in new leases in the top buildings in Central and Admiralty grew in the third quarter by a total of almost: 119%
This resulted in a rise in asking prices, reaching as much as, in Hong Kong dollars per square foot per month, $160
