With office rents and prices in Beijing expected to slide during the next couple of years, agents say the owners of the Hong Kong New China Manhattan Centre will have to adopt a pragmatic approach to filling the building. The current oversupply in the office sector will be exacerbated by one million square feet of new space due to come on to the market this year, with more of the same expected in 1998, according to a Jones Lang Wootton (JLW) survey. Agents agree that prospective tenants and buyers in the office sector will have ample opportunity to shop around to get the best deal on prices and rents. The China Hong Kong Manhattan Centre is in Dongcheng, the well-known commercial area in central Beijing within minutes of Tiananmen Square and the main railway station. The 15-storey building will include 10 floors of office space, three floors of shops and two floors dedicated to food and drink. According to the project's agent, Brooke Hillier Parker (BHP), office space is being sold on the whole floor basis at US$3,000 per square metre (about HK$2,160 per sq ft). Steve Luk Kar-min, marketing manager with BHP's China division, said that once a number of whole floors had been sold, the developer might sell smaller portions of office space. Mr Luk said the developer, Beijing Xin Zhong Gang Building Co, in which Hong Kong's Manhattan Garments has a stake, was aware of the slow sales market and had dropped its price to $3,000 per sq m from an initial asking price of $3,235 per sq m. For companies wanting to lease space in the building, asking rents have been set at $1.70 per sq m a day, or roughly $50 per sq m per month. The shopping centre portion of the development, which takes up the first five floors, is being leased at a daily rate of $2.50 per sq m, which means that tenants would pay about $75 per sq m a month, according to the agent. A number of agents said these rents and prices, particularly for the office floors, were on the high side when the abundance of empty office space was taken into account. One agent with considerable experience in the Beijing market said the developer's pricing for the office floors was in line with the rest of the Beijing market. However, asking prices throughout the market were too expensive and, with so much space available to lease, nobody was buying, he said. According to some agents, the developer should reduce prices by $500 to $700 per sq m if it is serious about selling. Asking rents are on the high side as well, according to some agents. One agent familiar with the office leasing market said vacancy rates were increasing. He said a range of $1.30 per sq m a day to $1.50 per sq m a day would be more realistic. Agents said the retail rents were about right. BHP's Mr Luk said these were asking rents and the lease also included a rent-free period, the length of which would be determined by the amount of space leased. FACT FILE Development: New China Hong Kong Manhattan Centre, Dongcheng District, Beijing Developer: Beijing Xin Zhong Gang Building Co Office: 10 floors or about 280,940 sq ft for sale or lease Office price: US$3,000 per square metre Office rents: US$1.70 per sq m a day or US$50 per sq m a month Retail: about 87,530 sq ft on floors 1-3 Food and beverage: about 3,372 sq ft on floors 4-5 Retail rents: US$2.50 per sq m a day or US$75 per sq m a month Marketing agent: Brooke Hillier Parker
