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SCMP Reporter

DESPITE a lull in activity at the beginning of the year caused by the stand-off between China and Britain, 1993 has seen some substantial increases in both sales and rents.

  Office prices in Central and Admiralty rose between 10 and 15 per cent in May alone, even though the average office price increase territory-wide was only 15 per cent for the first five months of the year.

  Similarly, luxury residential property prices in Repulse Bay and on the Peak jumped by 20 per cent.

  The long-awaited resumption talks between Britain and China in April caused this surge, and helped bring about a record level of transactions in May.

  Taking into account transactions of over $100 million, office sales of $9 billion and luxury residential sales of $2.6 billion were recorded in May.

  Between them they accounted for over half of the sales of $22 billion during the first five months of 1993.

  ''Major buyers were from China and Hongkong but, because some are joint ventures, it is difficult to say what the ratio is,'' said Koh Keng-shing, the executive director of First Pacific Davies.

  ''The granting of Most Favoured Nation trading status to China by the United States; the recent agreement to go ahead with the Western Harbour Crossing; the low interest rate compared with the inflation rate; and the devaluation of the yuan - which is causing mainland company's to convert to foreign exchange or to invest overseas - are all factors that will encourage this activity,'' said Mr Koh.

  Office prices have increased faster than rents during the past 12 months, leading to a return of between five and six per cent.

  Mr Koh forecasts that office yields will increase to six to seven per cent next year.

  Prices and rents of commercial property have taken off because of a shortage of supply.

  ''Supply is tight except in peripheral areas,'' said Vigers' director Gareth Williams. ''And this will continue next year.''   Out of a total of nine million sq ft of office space forecast to enter the market next year, none is Grade A property in Central or Admiralty, and the only prime property in those districts this year is Entertainment Plaza.

  Much of Citibank Plaza, Central Plaza and Times Square is now occupied or committed, and Mr Williams said that rents would continue to rise in prime property.

  By the end of this year, he expects rents will have risen by 40 per cent, and estimates next year will see a further rise of 30 per cent before they peak in 1995 after another 20 per cent increase.

  Mr Williams said that one effect of the rent increases would be for companies to move more back-room operations to Shenzhen.

  Prices are following rents, and increases are being fuelled by speculation. Prices have risen by between 20 and 25 per cent for almost new industrial properties in districts along the Mass Transit Railway such as Cheung Sha Wan and Kowloon Bay.

  The increase in prices of the new combined office/industrial buildings have lifted prices elsewhere, and have also caused rents to increase on average by 10 per cent throughout the territory.

  Vigers' director Stan Wong expects the upward trend to continue in selective locations.

  ''Knocking down old buildings to redevelop will reduce the supply, and there is not much new industrial property coming on stream this year,'' he said.

  ''The over-supply of property caused by companies moving factories to China has shrunk, and although more property will come on stream next year, this is unlikely to produce an over-supply again.''   A shortage of secondary office space meant that companies would continue to occupy new industrial buildings and use them for offices, warehouses and showrooms.

  During the last few months, demand for space in shopping centres in good locations had increased.

   Jones Lang Wootton's director Peter Lee said that, as a result, rents had risen by between 15 and 35 per cent this year although, the high commitment levels in new regional centres such as Times Square showed that companies were not discouraged by the increases in centres with the right facilities and catchment area.

  The supply of shopping centres in urban Kowloon is on the rise.

  ''Rents have increased more in Causeway Bay, Tsim Sha Tsui and Mongkok than in Central, but, short of a major political, economic or tourist upheaval, there is no reason why the upward trend of the past 10 years should not continue,'' said Mr Lee.



MFN status rejuvenates activity