SHKP upbeat on Central office outlook
Sun Hung Kai Properties, Hong Kong's biggest developer by value, says it is optimistic about the Central office market even after rents last year dropped the most since the 2008 credit crisis.
"We don't have big renewals coming up, and we're not seeing major tenants giving up large chunks of space," Lo King-wai, general manager at the developer's agency arm, told a seminar. "If demand comes back, then vacancy can be taken up very quickly."
Banks and brokerages, faced with slowing corporate finance activity, have since last year given up space in Central for other districts, where rents can be two-thirds lower. In January, financial services companies accounted for 49 per cent of prime office tenants in Central, CBRE data shows.
Central rents fell about 15 per cent in 2012, the biggest full-year decline since 2008, according to figures from Colliers International.
Lo said that even with the departures, occupancy at Sun Hung Kai's two biggest Central office buildings, One and Two International Finance Centre, stood at 99 per cent and 93 per cent, respectively.
The average vacancy rate in prime offices buildings in the district was about 5 per cent, Craig Shute, senior managing director at CBRE, said at the briefing on Wednesday. While banks had been shrinking, their space in the district might be taken over by expanding mainland firms and international retailers, he said.
"That's the beauty of Central," said Eric Wong, chairman of property investor Bricks & Mortar Management. "It's always desirable for people who can make the biggest buck. As the banks start to shrink, you will see other people come in."
New office supply in Hong Kong would fall about a third short of total new demand by 2020, CBRE said in a report in October.
Lo said average office rents in the city would rise about 5 per cent this year.
Merrill Lynch analyst Karl Choi said Central rents would be little changed this year as those elsewhere in the city would gain about 5 per cent to 7 per cent.