Thursday, April 1, 2010

Hong Kong CBD rental growth accelerates

Hong Kong CBD rental growth accelerates

(Hong Kong) – The ‘Premium Central’ district led the market with rental growth of 5.1% in November, the fastest rate since April 2008. Rents of premium buildings in the CBD have rebounded 12.7% since bottoming in July this year.

During the recent financial crisis, landlords in Central lowered their asking rents significantly in order to maintain occupancy levels in their office premises, says Xavier Wong, Head of Research for Greater China at Knight Frank. In November, the vacancy rate in Central stood at 3.4% and remained the lowest among all business districts. With increasing demand for office space from the finance sector, these landlords have been able to ask for higher rents.
The market is divided on the outlook for the leasing market over the coming year. As certain investment banks will relocate their offices from Central to International Commerce Centre (ICC) in Tsim Sha Tsui in 2010, some market watchers are wary of offering a positive forecast. They fear that vacancy levels in Central will drastically increase, hampering the recent revival of Grade-A office rents in the district.

However, Knight Frank believes the uptrend in office rents will continue in 2010. Rising demand along with a recovering economy should be enough to absorb the spaces gradually vacated by investment banks. For instance, of the 200,000 sq ft of space in Central vacated by an investment bank earlier this year, more than 75% has already been taken up, reflecting strong demand for premium office space in the CBD.

Another two investment banks will move their offices from Central to ICC, probably in mid to late 2010. The amount of space in Central these banks will retain is yet to be known. If their offices were vacated at the same time, the overall vacancy rate in Central would rise by about three percentage points. However, the two banks are likely to retain part of their operations in the CBD and relocate their offices in phases. This will mitigate the impact of their relocation on overall rental growth.

The recovery of Hong Kong’s economy will be more visible in the coming year. Mainland companies’ Initial public offering (IPO) activity in Hong Kong is expected to increase and demand for office space should strengthen in tandem. Against this backdrop, landlords in Central will have the confidence to lift asking rents, despite the partial relocation of two investment banks to ICC. Mr. Wong believes Grade-A office rents will witness a growth of about 15% in 2010, with rental growth in Central likely to outperform other business districts.

(ArticlesBase SC #1710587)

sharonng - About the Author:
Knight Frank LLP is the leading independent global property consultancy. Headquartered in London, Knight Frank and its New York-based global partner, Newmark Knight Frank, operate from 207 offices, in 43 countries, across six continents. More than 6,340 professionals handle in excess of US$886 billion worth of commercial, agricultural and residential real estate annually, advising clients ranging from individual owners and buyers to major developers, investors and corporate tenants. Knight Frank has a strong presence in the Greater China property markets, with offices in Hong Kong, Beijing, Shanghai, Guangzhou and Macau, offering high-quality professional advice and solutions across a comprehensive portfolio of property services. For further information about the Company, please visit www.knightfrank.com.hk.

Source:  http://www.articlesbase.com/real-estate-articles/hong-kong-cbd-rental-growth-accelerates-1710587.html