Office rents unlikely to slacken before end of 1996
IF the setting up of the Government task force on property prices has hit the mass residential sector, none of the negative sentiment has slipped through to the office market.
''People are still coming in with what are seemingly bottomless amounts of funds,'' said Gareth Williams, executive director of Vigers.
''Capital prices are unlikely to ease off until vacancies appear, then we will see an adjustment, but that is a long way off in my opinion.
''Large residential and office properties will keep going up after this temporary blip.'' David Young, research manager of Colliers Jardine, said office rentals were definitely heading up. The effect would be most severe in Central where there was virtually no new supply until early 1996.
''By the end of the calendar year, I would expect another 15 to 20 per cent on Central rentals,'' Mr Young said.
Average office rents in Central at the end of last year were about $67.50 per square foot, according to Colliers Jardine. By the beginning of May, the figure had risen to $80 per sq ft and even higher, according to Mr Young. ''The only way they can go isup,'' he said.
Stockbroker HG Asia agrees.
''Rents are heading in only one direction,'' it said in a recent report. ''Any diligent property analyst can project the maximum supply of new Grade A office space in the core areas with the utmost clarity - that is, to the nearest hundred square feet for the next three years.
''The simple fact is there just isn't any major new supply in Central before 1996.'' HG Asia said even as supply rose in 1997, take-up would rise after several years of being constrained by supply.
The brokerage expected office rents to rise by 50 per cent in 1994 and a further 25 per cent in 1995. ''Even using the conservative assumption that interest rates will climb 150 basis points (1.5 per cent) by the end of 1995, our rental growth assumptions imply capital values 47 per cent higher in 18 months.'' On Kowloon side, the supply situation is far heavier and rental growth is expected to be far less dramatic.
Jones Lang Wootton's Charles Wheatman said office prices in key areas would continue to strengthen during the year as the sector had become the focus of investors' attention.
Some Japanese department stores have indicated rising rents will force them to close shop in the territory. And, in the commercial sector, sky-high rents are threatening the tourist industry with a lack of hotel rooms as developers knock down hotels to make way for more lucrative new office space.
