Government plans to increase the supply of commercial land outside prime areas are unlikely to help ease soaring office rentals in the core office district in Central, property developers and analysts say.
Critics of the government plan call instead for additional office space to be made available in Central, where grade-A office asking rents have risen to as much as HK$207 per square foot recently.
'Surging grade-A office rents in Central are being driven largely by demand from international financial services companies. Therefore, the immediate solution is to add more land for sale in the prime business district,' said Charles Chan Chiu-kwok, managing director at Savills Valuation and Professional Services for Greater China.
So long as there is no improvement in the supply shortage in core Central, office rents - which were bid to a high of HK$207 per sq ft in the International Finance Centre last month - will continue to rise, said Chan.
Rising rents are forcing some tenants out of the area and among those joining the exodus was mortgage financier Leland Sun, who moved part of his operation to Wan Chai, from Central, a year and half ago.
'This year I have decided to move myself and a few other colleagues to Wan Chai as well. The increasing rental costs are definitely driving out small to medium-sized enterprises from grade-A office buildings in Central and other parts of Hong Kong,' said Sun, managing director of Pan Asian Mortgage Group.
For most businesses, revenue and bottom-line growth had failed to match rising rental costs, he said, forcing them to relocate to lower rent premises outside of the core office district.