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1993 a boom year for prime office space

Kenneth Ko

HONG Kong saw a record take-up of prime office space last year despite a drop in supply, says Jones Lang Wootton (JLW).

As further evidence for the boom in the office sector, JLW director Michael Mahony said 4.73 million sq ft of net office space were absorbed last year.

The take-up represented an increase of 8.5 per cent over the previous record set in 1991, he said.

In 1992, the take-up of office space was 3.92 million sq ft.

Mr Mahony said the extra take-up last year was especially surprising given the reduced supply of new stock, amounting to 3.53 million sq ft.

He added that about 40 per cent of the office space taken up was in buildings completed before the end of 1992 which had vacancies carrying over into 1993.

According to earlier estimates, growth in office rentals was an exceptional 56 per cent last year.

However, with the rapid expansion in the financial services sector, demand for high-quality office space continued to grow and fuel the take-up rate.

Chris Thrift, commercial director at Richard Ellis, said the territory would face sustained acute shortage of office space.

He said office rentals and prices would continue to rise considerably over the next two years, while relief was likely to follow afterwards as more new buildings came on stream.

According to JLW, about 3.4 million sq ft of office space were taken up on Hong Kong Island, representing 72 per cent of last year's total.

Of the space taken up on the island side, 84 per cent was let or sold outside Central, the bulk of which being in the Wan Chai and Causeway Bay areas, where 2.28 million sq ft were occupied.

Five buildings attracted the most tenants or buyers last year: Times Square, Devon House, Central Plaza, Citibank Plaza and Wu Chung House.

Mr Mahony said there was considerable interest in cheaper-priced office buildings in decentralised areas.

''This led to Devon House in Quarry Bay and Times Square in Causeway Bay being leased far more quickly than any other buildings during the year,'' he said.

The volume of office take-up in Kowloon was only 1.3 million sq ft last year, but it represented a major increase on previous years.

Mr Mahony said the trend was expected to continue this year as more and more tenants fled to Kowloon as rent refugees.

He said the reluctance to cross the harbour was reducing as tenants felt that certain developers were building office towers of quality comparable with those found in Central.

In addition, about 83 per cent of new office space coming on stream this year would be in Kowloon, he said.

Meanwhile, a property report conducted by Colvin & Horne said office prices had surged by more than 30 per cent from December until the end of last month.

Prices for certain top grade offices in core Central had even risen by more than 50 per cent, it said.

The report said the latest average record price was set at $17,100 a square foot by the sale of the 23rd floor of Nine Queen's Road Central, compared with an asking price of $12,000 in November last year.

An office unit at the Far East Finance Centre was sold at an average price of $16,500 a square foot, compared with $10,500 two months ago.

Asking prices for office units at the Convention Plaza in Wan Chai reached $13,500 a square foot recently, the report said.

Prices for offices in fringe areas also jumped strongly. Colvin & Horne said the recent buying spree on office properties reflected investors' confidence in the sector.

It said the sharp increase in office prices could be attributable to the limited supply and rising speculative interest in the sector.