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SCMP Reporter

LAWRENCE Boey, general manager of the Guangzhou Garden Hotel, has a very good reason to smile this year: an insatiable demand of office space in this gateway city in southern China.

  Property analysts are predicting a bumper year for his hotel, in one of the hottest business districts in Guangzhou, as the city looks set to witness another business boom this year.

  Despite the fact that the Garden Hotel has raised the rent for its office apartments by over 20 per cent, the waiting list is not getting any shorter.

  ''We have clients who have been on the list for as long as six months, but we just have to say sorry,'' said Mr Boey.

  Although the completion of the Guangdong International Hotel and the World Trade Centre had provided a temporary solution to the shortage of high-class offices in Guangzhou, analysts said market demand still outstripped supply.

  Michael Choi, managing director of Land Power Property Consultants, believed the market shortage would continue at least until 1996.

  ''We are not seeing any major completion of office buildings in Guangzhou in the coming two years. Prices are unlikely to come down before 1996,'' Mr Choi said.

  According to Mr Choi, office rents in Guangzhou could soar to $30 per square foot and the selling price is likely to stay above the HK$3,000 per sq ft level this year.

  ''The main reason is market demand. There are still a lot of foreign companies which want to get into the China market by setting up in Guangzhou. Moreover, the building of the Guangzhou underground railway and relocation of sections of Cathay Pacific into China are also pushing the rents up,'' Mr Choi said.

  The recent introduction of the property value-added tax was also likely to dampen developers' desire to build new offices in Guangzhou.

  ''If this VAT is implemented, it means developers will face a tax rate of at least 53 per cent,'' said Mr Choi. ''So I think a lot of developers will think twice about their projects, and the delay will further drive prices up.''   Another China analyst, Edward Cheung Kwok-ching, a director of C.Y. Leung & Co, also believed the Guangzhou office market would remain bullish over the next couple of years.

  He pointed out that only a few companies were moving their offices out of hotels such as the Garden and China Hotel because they felt that office-hotel rents were high.

  He said most foreign companies still preferred to stay with the hotels, which offered them better locations and prestige.

  ''Only small Chinese companies are moving out,'' said Mr Cheung. ''They make up a small minority.''   Analysts believe that the current market buoyancy will have an impact on how the hotels conduct their business.

   Mr Boey said his hotel would spend about 100 million yuan (about HK$88.64 million) this year in renovation alone to expand its business facilities, such as function rooms, because many of his hotel clients were frequent individual travellers (FIT) instead of tourists.

  ''Guangzhou is no longer a tourist destination and we are aiming at the FIT sector as our customer group,'' said Mr Boey, who claimed his hotel had a year-round occupancy rate of 70 per cent in 1993.

        According to Mr Boey, business travellers now account for about 65 per cent of his hotel's business, with tourists accounting for the remainder.

  He also said his hotel had not been hurt by the abolition of the Foreign Exchange Certificate (FEC) by the Chinese Government, although it had had to re-adjust its accounting methods to accommodate the currency changes.



Demand for office space pays off for Garden Hotel