'New economy' firms drive up rentals in Central, Island East
Office rents made a strong comeback in the first three months this year, with Central and Island East enjoying the biggest quarterly rises since 1988, according to Jones Lang LaSalle.
Based on the property index compiled by the consultancy firm, net effective rents for offices in Central rose 23 per cent, while those in Island East climbed 26 per cent.
Wan Chai and Causeway Bay net effective rents rose 13 per cent, while those for Tsim Sha Tsui were down 0.5 per cent.
Jones Lang LaSalle managing director Samuel Whiffin said Central and Island East growth was largely driven by demand from 'new economy firms'.
Director of research and consulting Tim Bellman said Internet and telecommunications companies' leasing demand in Island East and fringe Central had surged in the quarter. At the same time, many financial institutions and professional firms were looking to expand in core Central.
This had helped bring the overall vacancy rate in Central down to 12.8 per cent, compared with 14.4 per cent at the end of last year.
Mr Bellman said there were no signs the momentum would slow in the second quarter, although there were some doubts about whether dotcom-related demand was sustainable in the longer term.
He believed Hong Kong's strong economic recovery and the improving outlook for the mainland suggested a strong take-up throughout this year.
Mr Whiffin said e-business' implications for the property market extended beyond the office sector.
Industrial rents recorded a slight rise of 1.4 per cent, partly driven by the e-business boom.
Analysts said another factor which might boost rents was limited supply expected in the future.
Grade-A office supply will drop to 660,000 square feet this year and 350,000 sq ft in 2001, from last year's 3.7 million sq ft, according to the Government's latest figures.
The significant pick-up in rents also stimulated developers to start their on-hold projects, analysts said.
For example, Swire Properties recently announced it would start in the next 12 months construction on its Cityplaza One extension and Cityplaza Two in Taikoo Shing.