Investor demand for HK office space rises 11.5pc in August

The appetite of investors for buying office space showed no signs of abating last month, with several major deals clinched, according to Knight Frank.

A mainland-listed company, for example, bought two floors in Kowloon Commerce Centre for HK$376 million, or HK$7,200 per square foot, while The Open University of Hong Kong bought five floors in the same building for HK$757 million, or HK$6,087 per sq ft.

While transaction volume rose, the total value of office transactions fell sharply, data from Midland Realty shows.

Eric Ong, a director at Midland's commercial department, said total value dropped because sales of office units in Central fell.

Investors stayed away from Central properties as rents in the district had fallen, Ong said. Capital shifted to less expensive areas like Kowloon East and Kowloon West.

On the leasing front, Knight Frank said luxury retail brands needed more office space due to their continuous store expansion. Gucci, for instance, leased an 8,600 sq ft, half-floor office unit in Hysan Place in Causeway Bay. Chanel has also expanded, leasing an 8,700 sq ft, mid-floor unit in the Hong Kong Club Building in Central.

Looking ahead, Knight Frank expects Central landlords to remain flexible in their asking prices, amid diminishing office demand in the area. "Rising vacancy rates are likely to drag down Grade-A office rents in Central by 5-10 per cent, during the second half of 2012," it said.

Grade-A office rents in non-core areas should remain stable or rise slightly in the near future.