Government relocations 'will take time' to ease office supply
The government plan to relocate some of its offices away from the core districts of Central and Wan Chai is unlikely to ease the tight supply of grade-A office space in the short term as it will be three or four years before the vacated space is available to new tenants, say property consultants.
Financial Secretary John Tsang Chun-wah detailed the amount of commercial space that would be released to private tenants by the withdrawal of the government from the key sites in the central business district.
On completion of rezoning procedures, the site formerly occupied by the Independent Commission Against Corruption, which has moved to North Point, could provide 40,000 square metres of grade-A office space in Murray Road, Central.
Office space leased by the government in Central and Admiralty would be reduced to less than 230 square metres by 2015, from the present 27,000 square metres. And the sale of three government office buildings in Wan Chai, once personnel are relocated in phases to Kai Tak and Tseung Kwan O, will provide 175,000 square metres of commercial space in the core CBD.
Finally, the relocation of staff from the Trade and Industry Tower next year will release more than 18,000 square metres in Mong Kok for commercial use.
John Siu, an executive director of valuers Cushman & Wakefield, said the relocation of the ICAC had freed up a prime site in Murray Road that would be big enough to be developed into a medium-sized office building.
"But we assume the zoning procedures will take several months to a year to complete, and it will then take several years for it to be put up for tender," he said. "So it will be no surprise to see the real supply coming out only in four or five years.
"It will therefore have little immediate impact on addressing the present undersupply of grade-A office space in Central."
Because supply of office space in the core CBD has been limited, rents have risen sharply and Hong Kong is the world's second-most expensive city for office space. But rents have been declining from their peaks, and Siu expects grade-A office rents to fall a further 10 per cent this year to an average of HK$90 per square foot, after declining 16.5 per cent last year.
"Hong Kong office rents are still considered to be not at all cheap," he said.
Edward Farrelly, head of CBRE Research, Hong Kong, Macau and Taiwan, said that although the Murray Road and Mong Kok sites would not be available for occupation until 2017 at the earliest, the government's commitment at least provided a greater degree of clarity and gave occupiers more comfort regarding deliverability.