Soaring main street rents and property prices have pushed up rents of mini-offices in industrial buildings by over 10 per cent in the past few months, property agents say.
'Rents of tiny offices in industrial areas have surged by over 10 per cent on average in the last three to six months thanks to price inflation under the overall economic environment,' said Raymond Chu Leung-hang, district director of the industrial office department of estate agency Ricacorp Properties.
Demand for small offices in industrial buildings - available at monthly rents of around HK$4,000 or below and scattered in areas such as Kwun Tong and Cheung Sha Wan - had increased by about 3 to 5 per cent, he said.
The increase was driven by a growing number of people starting their own businesses and enterprises relocating to cheaper premises to escape rising main street rents.
Chu said rent rises in such outlying locations might be slower than office rents in prime locations such as Central and Tsim Sha Tsui.
But owners were nonetheless becoming more aggressive and demanding rises of between 15 and 20 per cent and eventually settling on increases of 10 per cent or more after negotiation.
He expected such mini-office rents would continue to rise at a faster pace than inflation, from HK$10 to HK$13 per square foot on average now to between HK$12 and HK$15 by the end of this year.
'Owners may increase the rental by just HK$100, but percentage-wise it can be a huge rise,' he said.
His comments came as property consultancy Colliers International published its latest global office report. It said Hong Kong office space cost US$191.97 per sq ft per year at the end of last year, the highest in the world. Costs were up nearly 19 per cent from US$161.42 per sq ft per annum in June last year.
Hong Kong's top-priced offices were followed by offices in London's West End and Tokyo, priced at US$133.02 and US$105 per sq ft per year, respectively, the survey said.
Dick Lo Wai-tak, sales director at Centaline property agency's industrial department, endorsed the view that rents of mini-offices in industrial buildings had risen by more than 10 per cent on average.
Lo said in the past few years, some investors and industrial building owners had converted their premises into mini-offices to increase rental yields.
'For example, the monthly rental on a 5,000 sq ft unit in an industrial building in Kwun Tong is around HK$5 per sq ft. But if it is converted into small offices, the rent is HK$9 to HK$10 per sq ft,' Lo said, adding that better renovated and equipped mini-offices could be as expensive as HK$30 per sq ft.
He said rentals for such properties were more volatile than that for grade A offices because the supply of the latter was relatively more stable.
An office worker whose boss bought a unit in Morlite Building in Kwun Tong two years ago and converted it into 26 mini-offices sized from 70 sq ft to 500 sq ft, said the business was doing well, with an occupancy rate of around 95 per cent.
The cheapest office in the renovated building was HK$1,600, or around HK$22.8 per sq ft per month, he said.
Property agency DTZ said high rentals and tight vacancy meant that some businesses had been squeezed out of the central business district.
Central and Admiralty had the largest decline in the take-up of grade A office space in the first quarter of the year over the previous quarter.
'Take-up in all office districts in Hong Kong dropped in the first quarter of this year due to seasonal factors and because of the continual surge in rental,' the firm said.
Highest in the world
Hong Kong office space is said to be the world's most expensive, at almost this number of US dollars per sq ft per year: $192