Rents push big firms overseas
SKY-ROCKETING commercial rents are forcing multinational companies to seriously consider moving all but their essential China-related business out of Hong Kong, says Mark Bernard, a director of Chesterton Petty.
The business community had reached the end of its tether, Mr Bernard said.
Chesterton Petty was getting as many as 40 calls a month from corporations moving to Singapore or other regional centres, he said. In contrast, six months ago that number was one or two.
''Companies now want us to do feasibility studies for them on the comparative cost of moving part of their operation out of Hong Kong,'' Mr Bernard said.
Meanwhile, they were keen to move all their non-China operations to other regional centres that charged ''a pittance'' in comparison to Hong Kong rents.
Moving allowed them to hire more people for the Hong Kong office to handle the increase in local and China-related business.
''There are a lot of these companies who are asking me if they really need their headquarters here,'' Mr Bernard said.
''Hong Kong is not attractive any more: rents are too high; we have high inflation; there is a lack of office supply.
''Some companies that have re-negotiated their leases are now paying 100 per cent more.'' Many companies were findingthe rest of Asia was a cheap place to work and live.
''When you look at the numbers, it is just mind-boggling what rents are going for outside of Hong Kong,'' Mr Bernard said.
Grade A office space in Singapore was 50 per cent cheaper than in Hong Kong, he said.
Grade A commercial space in Orchard Road cost $26.80 a square foot in contrast to the average $70 to $80 a sq ft in Central for space of the same quality.
Malaysia was even cheaper: prime office space cost $13.90 a sq ft. Landlords were charging $9 a sq ft for Grade B space.
Agents are predicting that the cost of leasing both office space and luxury homes in other regional centres will fall in the next year.
The Jones Lang Wootton Asian Property Guide says a further two million sq ft of office space is slated to come on stream in Singapore soon and will further depress rents.
Mr Bernard said a similar situation existed in luxury housing in these centres, which provided leasing and buying bargains that Hong Kong-based executives could only dream about.
In Singapore, a terraced three-bedroom, two-bathroom home measuring 2,500 sq ft cost $1,900 a sq ft - nearly three times cheaper than in Hong Kong'', Mr Bernard said.
In Kuala Lumpur, there had been a slowdown in the residential market. Landlords were offering a variety of perks to attract tenants.
''In Kuala Lumpur, there is a rent-free period and the landlord will even pay for the cost of relocating,'' Mr Bernard said.
The JLW guide says a house in the Malaysian capital is about 10 times cheaper than in Hong Kong.
The vacancy rate in Kuala Lumpur was at 10 per cent but there was 10 million sq ft of new property coming on stream between now and 1996. ''There is going to be a huge vacancy rate by then,'' he said.
Mr Bernard anticipated more multinationals would move part of their operations outside Hong Kong. In the next 12 to 18 months, commercial rents would increase by at least 30 to 40 per cent and even more so in Central, he said.
However, in the longer term, there ''appears to be a light at the end of the tunnel for them''.
There was an estimated eight million sq ft of commercial space due to come on to the market in Hong Kong between now and 1997.