Hong Kong takes world lead in office rental costs

Hong Kong overtook London as the most expensive place to rent offices last year, but the No1 position may be fleeting as local landlords brace for a big decline in the market this year.

A faster pace of decline in rents in Britain's capital helped Hong Kong gain the dubious honour for the first time in almost a decade, figures from property consultant Cushman & Wakefield revealed.

Although analysts forecast a stronger performance from the Asian property market than Europe or North America, Hong Kong is expected to suffer the biggest drop in office rents across the region, with the top position likely to be taken by Tokyo.

Rising unemployment and deteriorating hiring expectations were the key factors dragging down office rents in Hong Kong, according to CLSA head of Asia property research Aaron Fischer.

'Hong Kong office rents are expected to fall 60 per cent from the end of 2008 to the end of 2010, while we expect Japan office rents to remain fairly stable or fall slightly,' Mr Fischer said. 'Hong Kong will not be No1 this year.'

Simon Lo Wing-fai, a director for research and advisory at Colliers International (Hong Kong), said the practice of having long-term leases in Japan, which may extend five or 10 years, would make the rental correction in Tokyo relatively more moderate than in Hong Kong.