Central exodus is under way

A LEADING property consultant believes an increasing number of businesses will look for office space out of the Central area in the future.

Chris Thrift, a director at the property consultants Richard Ellis, said lower rental charges and the high quality of buildings and communications in neighbouring districts would lead to businesses setting up their headquarters in a much wider area than in the past.

Mr Thrift said the market for office space in Hong Kong was changing.

'The stigma of having an office out of Central is no longer there. In my view, areas such as Central, Wan Chai and Causeway Bay have become one market,' he said.

'The differences between them have blurred and the days when it was thought you could only stay in Central have gone.' Over the past year, many of the major firms and institutions in Hong Kong have begun moving part of their operations out of Central.

These include Nat West Markets, which is now based in offices in Times Square in Causeway Bay.

Mr Thrift said the widening of the office base on Hong Kong island would continue in the near future as developments in Quarry Bay and North Point were completed.

'A lot of companies have discovered that many of their employees do not necessarily always want to work in Central,' he said.

'They may live in Kowloon and elsewhere and so it may be easier for them to work in an area like Quarry Bay, for example.' Mr Thrift said office rentals on Hong Kong island had virtually doubled over the past 18 months.

Some surveys put the average rental charge as high as $84 per square foot.

The rate of rental increase on Kowloon side has been around 30 per cent over a similar period, according to Mr Thrift and that has led some companies to look for office accommodation across the harbour.

Mr Thrift said the market was 'very tight'.

'There is not a large amount of office space available. If you are looking for 50,000 sq ft it would be hard to identify premises where you could move.

'The same applies for smaller organisations looking for 30,000 sq ft.

'For small firms looking for 5,000 sq ft there are premises, but these can be expensive options.' Mr Thrift said demand for office space had dropped slightly in recent months after a number of large financial institutions moved premises over the last year, but it was still a fairly active market.

He said by the end of next year there may be a trend for larger institutions to buy office space rather than rent.

But the stimulus to enter the property market was not necessarily dictated by increasing rental charges.

'The problem for companies is that leases are on a short term basis in Hong Kong.

'Buying a property gives a company a much clearer view of what their costs are going to be for the next 10 to 20 years. That is extremely useful for them.' Mr Thrift said the future demand for office space in Hong Kong was being bolstered by the steady arrival of companies looking for business opportunities in China.

But he said there were factors which could lead to a levelling off of the market.

'Many of the large organisations which have been here for a very long time have just about reached their optimum level in supplying the domestic market in Hong Kong.

'Also, when the infrastructure is completed in China, many firms which have set up offices here to exploit the market on the mainland will, inevitably, move to China itself.' Mr Thrift said the other key part of the office sector in Hong Kong was firms using the territory as a regional base.

'There is talk of firms moving to other areas such as Singapore, but I have seen no evidence of that happening,' he said.

'What we may see is that when the economy in a particular area, such as the Philippines, grows then some firms may move some of their operations there.'