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  • Dec 28, 2014
  • Updated: 5:02am
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PROPERTY

Central office rents to decline further over woes in banking sector

PUBLISHED : Friday, 11 January, 2013, 12:00am
UPDATED : Friday, 11 January, 2013, 3:56am

Office rental in Central, the most expensive worldwide, is set to extend its biggest decline since the global credit crisis, the world's two biggest property agents say.

Leasing costs in the district where Goldman Sachs and HSBC have offices would likely be little changed this year, said Rhodri James, the executive director for office services at CBRE. Jones Lang LaSalle saw rents dropping "slightly" in the first half before picking up in the second, said Ben Dickinson, the head of Hong Kong markets.

Banks and brokerages, faced with slowing corporate finance activities, are giving up space in Central for locations in the city where rents can be two-thirds lower. Global financial services firms have announced a total of more than 300,000 job cuts worldwide since the start of 2011.

"It'll be a fairly slow market in 2013," James said last month. "We're going to keep seeing bad news in the banking sector and that's not going away in the first half. If they continue to cut back and hand back space, we could be in a similar situation in the second half."

A Colliers International index that measures confidence in the office leasing markets among brokers in Asia stood at 57.1 per cent in the fourth quarter, compared with 62.9 per cent in the first quarter and 55.1 per cent in the third. A higher number indicates a more optimistic outlook.

The average rent for prime offices in Central dropped 12 per cent from a year earlier to about HK$98.80 per square foot a month at the end of the third quarter, Colliers said. That was the biggest fall since 2008.

With financial services firms migrating their back offices - and sometimes the entire operations - away from Central, almost all other major office districts in the city posted gains in rental rates and drops in vacancies last year.

Central's grade A vacancy rate rose to 5.5 per cent in the third quarter from 3.5 per cent a year earlier. Meanwhile, in Island East, Tsim Sha Tsui and Sheung Wan, it dropped to below 3 per cent. In Kowloon East, vacancies fell to 9.6 per cent.

"The trend will continue and that won't just be for next year," said Dickinson. "Central has such a rental premium against the other sub-districts and Hong Kong is an easy place to get around."

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