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Hong Kong property

Hong Kong government wastes money paying over the odds for offices, watchdog finds

Audit Commission report details litany of poor-value deals, including six leases with rents at least 40 per cent higher than the going rate

PUBLISHED : Wednesday, 22 November, 2017, 7:44pm
UPDATED : Wednesday, 22 November, 2017, 10:52pm

The Hong Kong government has blown taxpayers’ money on exorbitant rents for offices, according to a report released on Wednesday by its watchdog.

One office costs 70 per cent above the market rate, while another costs HK$1.4 million a month but is mainly used to store records. Another two had been left empty for months but were still draining some HK$250,000 a month from the public purse.

The findings were published in the latest report from the Audit Commission, a government watchdog, and sparked criticism of the government from the Legislative Council’s opposition camp.

“The report seems to show that [the agency] has been a big money splasher,” Democratic Party lawmaker Andrew Wan Siu-kin said. “Every cent that it spent belongs to Hong Kong people. If [the agency] was working for a private company, it would have been fired a long time ago.”

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According to the report, the commission reviewed 170 out of 629 leases involving the government renting private offices referred by the Government Property Agency, the body that manages property for different departments.

It found 35 per cent of the leases, or 60 of them, involved rents higher than the market rate. In six leases, the rents were at least 40 per cent higher than the going rate.

In one case, the Civil Engineering and Development Department started to rent a 12,000 sq ft Grade B office – on a three-tier grading system with A being the highest – in Kwun Tong in 2003 at about HK$79,000 a month.

But by 2015, when the department renewed the contract for the fourth time, the rent had risen almost sevenfold to HK$551,000, or HK$47 per sq ft.

That was 72 per cent higher than the average rent for the same grade in Kwun Tong – HK$27 per sq ft – and even more expensive than the grade’s average in the prime spot of Tsim Sha Tsui, which was about HK$44 per sq ft.

The commission said there was no record of the agency looking for cheaper options.

It also found that the agency and the Labour Department had been paying rent for two offices in Quarry Bay left idle since March, resulting in a total rent of about HK$1.4 million by August, when the commission did the investigation.

The commission found that the agency only told other government departments about the vacancy at one of the offices, five months before the contract ended, so no department was interested, while the Labour Department had delayed using the other office.

In another case the report highlighted, the Social Welfare Department rents a 56,000 sq ft Grade A office in Kowloon Bay at HK$1.4 million a month, but 76 per cent of the office space has been used to store records.

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The commission said the department twice suggested the agency seek cheaper places for storing records, but the agency demurred, saying moving would mean new renovation costs and that the rent in Kowloon Bay was still low. But the commission found other government departments had been able to rent cheaper places to keep records.

The agency agreed with the commission’s suggestions that it seek more property options and keep records of its reasons when it declines to consider cheaper ones, as well as making more efficient use of vacant offices.

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The head of the agency, Tommy Yuen Man-chung, said all properties were assessed by professionals and rent was not the only factor when considering renewing contracts. He said other factors included economic benefits and lease conditions.

Yuen said the agency had asked the Labour Department to use its vacant office properly.

The department said it had delayed using the office due to logistics problems but had set up a relocation plan.