Office prices will rise a further 11 per cent this year, according to FPDSavills. The property consultant's latest figures showed office prices had edged up 2.1 per cent in the third quarter. Rents had increased substantially this year, leaving yields at about 7 per cent, the highest for five years. Prices were expected to catch up in the coming two quarters as many mortgagee properties, which had capped prices, had been cleared from the market. Strata-title sales were steady, with renewed interest from local and foreign investors. Recent deals included the sale of the 22nd floor at Nine Queen's Road Central for HK$109 million, representing a unit rate of HK$8,000 per square foot gross. A floor in the Far East Finance Centre in Admiralty sold for HK$6,000 per sq ft. As rents further improved, the consultant expected sales to pick up despite the gloomy stock market. According to FPDSavills, office rents in Central surged 74 per cent this year. Government figures recorded an average new supply in Central at 430,000 sq ft net a year between 1994 and 1999. The completion of Two International Finance Centre and 11 Chater Road will add 1.2 million sq ft of net office space, about three times the average annual supply in Central. The consultant's latest rental index showed that overall effective rents rose 20.8 per cent over the third quarter and it expected them to rise a further 13 per cent this year. With availability in Central still extremely tight, leasing activity was constrained in October. Completion of the Sing Pao Centre at 8 Queen's Road Central triggered a few more leasing transactions at an average of HK$30 per sq ft gross. Tenants seeking expansion space were considering west of Central and in Tsim Sha Tsui, where rent differentials were greatest, the consultancy said. Leasing in Tsim Sha Tsui had become more active, with an insurance company recently taking 28,000 sq ft in the Miramar Tower. At the end of October, vacancies dropped across all districts. Central, Wan Chai and Tsim Sha Tsui recorded vacancies of 4 per cent, 3 per cent and 10 per cent respectively. Vacancies in Tsim Sha Tsui were relatively high as a result of the short-term supply surge with this year's completion of the Gateway towers. According to a report by another consultant, Chesterton Petty, the market for grade-A offices in Admiralty, following the generally positive sentiment, continued to see more leasing and sales activity. Limited prime office space in Central had forced demand into the neighbouring areas, it said. Rentals for grade-A offices in Admiralty had surged about 50 per cent since the last quarter of last year. Rents for grade-A space are HK$30 to HK$57 per sq ft on net area, with an average of HK$43 per sq ft. Almost all large floor plates in the area were occupied, with only partial floors available in the prime grade-A buildings, such as Pacific Place and Lippo Centre, it said. Grade-A prices in Admiralty had been mostly stable, in the range of HK$4,000 to HK$6,500 per sq ft gross, with prices of Lippo Centre, the area's top strata-title property, about HK$5,600 per sq ft, according to Chesterton Petty. Market yields for grade-A space in Admiralty were between 5.5 per cent and 7.2 per cent, the consultancy said.
