Spendthrift government allows landlords to laugh all the way to the bank
Government Property Agency has been signing leases for office space at way above market rates, a bonanza that developers are all too happy to accept
The government may be the only group in Hong Kong that is happy to pay high rents. As if the current market is not frothy enough, the Government Property Agency, which is responsible for finding and negotiating private leases for various departments, has been more than willing to pay 40 to 70 per cent more than similar leases in the same districts.
So much for the government’s efforts to calm the property market. After all, it’s not its money.
According to the government auditor, 35 per cent of 170 leases it examined cost more than the going rate. In six instances, it was more than 40 per cent above the market rate.
It sounds almost systemic in the way the agency chooses to pay more than necessary.
In one particularly egregious case, the Civil Engineering and Development Department started off paying for a 12,000 sq ft office in Kwun Tong in 2003 at HK$79,000 a month, but ended up forking out HK$551,000 by 2015. At HK$47 per square foot, it could rent the same type of office at a prime location in Tsim Sha Tsui with money to spare.
There was no record that the agency had looked for cheaper options for the department.
In another case, the Social Welfare Department rented a 56,000 sq ft Grade A office in Kowloon Bay at HK$1.4 million a month – to store files and records. Why did the department need a top-grade office for storage? It is one of life’s great mysteries.
Earlier this year, the Labour Department had been paying rent for two offices in Quarry Bay for a combined rent of HK$1.4 million. But both were left empty because it had delayed moving into one, while the agency neglected telling other departments that they could use the other.
It’s not all the fault of the agency head, Tommy Yuen Man-chung, a career civil servant. He took over the post only in December 2015, so some of the problems were inherited. But there is no indication that he tried to launch a value-for-money reform until now, after the auditor has exposed his agency.
As deputy secretary for development, he was instrumental in lowering the threshold for the compulsory sale of old buildings for redevelopment in 2010 from 90 to 80 per cent of owners agreeing to a deal – a bonanza for developers.
Yuen is surely generous with developers and landlords.