bodyType

customContents

entityId

entityUuid

articlePageQuery

filter

article

articleBaseAdvertisingInfoArticle

articleListArticle

articleSeoArticle

helpersCheckIsPostiesArticle

hooksArticleAcknowledgementGateOverlayArticle

hooksTrackPageViewArticle

hooksContentInterestArticle

articleLinkingDataContent

articleSchemaContent

liveArticle

advertZone

sentiment

contentLock

topics

types

sections

moreOnThisArticles

urlAlias

commentCount

sponsorType

authorLocations

authors

paywallTypes

corrections

displaySlideShow

multimediaEmbed

printHeadline

seriesContainer

socialHeadline

headline

flag

firstTopic

glossary

flattenTypeIds

publishedDate

additionalInfoBoxes

images

image

relatedLinks

relatedNewsletters

__typename

createdDate

sponsor

factSheets

series

disableOffPlatformContent

published

updatedDate

summary

subHeadline

body

keywords

copyrighted

customTimezone

liveContents

SCMP Reporter

Office rents are expected to move downwards further before bottoming out next year, according to estate agents.

 The large supply, estimated at more than 10 million square feet for last year and this year, has forced rents down and the decline has been aggravated by the weakened economic environment.

  According to FPDSavills, grade A office space rents fell by 33.4 per cent last year and are down by 34.3 per cent from their peak in the third quarter of 1997.

  Effective rents, taking into account the impact of longer rent-free periods, have slumped by 53.7 per cent from the peak.

  The fall in rents accelerated last year amid the volatile and high interest rate environment with more companies reporting layoffs and bankruptcies.

  Landlords offer all kinds of incentives, including lower rents and rent-free periods of as much as 15 months for a three-year lease.

  FPDSavills senior director of research Simon Smith said the office market would continue to see some weaknesses.

  However, rents in buildings in Central had stabilised.

 Overall rents would drift off, possibly by a few per cent, during the remainder of the year and the rate of decline would slow, especially in the second half of the year.

  Mr Smith expected grade A office rents would find the floor early next year and stabilise as supply of new spaces decreased and the economy began to recover.

  Joanne Lo, director of commercial agency at Chesterton Petty, said some companies, such as those in the information and technology business, were still expanding their operations.

  The decreased rents encouraged them to lease more spaces at the same budget, she said. Rent take-up was improving and Ms Lo expected a limited downside in rents.

  FPDSavills forecast that office supply would drop to a below-average 1.3 million sq ft next year and 1.9 million sq ft in 2001, compared with four million sq ft this year.

  The drop in supply was due to the delays or scrapping of some planned office projects which were planned to begin in late 1997 and last year.

  Looking beyond 2001, completions of offices will be subject to delays as many developments are on the drawing board and pending approval from authorities.

  FPDSavills predicted that office vacancy would surge to more than 18 per cent this year before falling back to 14 per cent next year when supply dropped.

  It estimated that average grade A office prices fell by 47.3 per cent last year and by 58.8 per cent from the peak in the first quarter of 1997.

  Average investment yield subsequently moved upwards and rose to 8.2 per cent at the end of last year from 6.5 per cent in the fourth quarter of 1997.



Decline in office rents to continue