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DTZ: A-grade HK office rents up 20% this year

HONG KONG: Rentals for grade A office space in Central and Admiralty may rise as much as 20% this year due to the buoyant market outlook and strong business demand, property consultant DTZ says.

The rise would follow strong gains in the first half of last year as the local economy flourished, resulting in a whole-year take-up figure of close to three million square feet, a sound increase from 2009, it added.

Most districts have seen a decline in vacancy rates and rents have risen about 32% across all districts.

"It is expected the office market will continue to be buoyant in 2011," the report says.

Central and Admiralty remain the most expensive office locations, with monthly net rent of HK$105 (RM41.40) per square foot in the fourth quarter, while top-grade office buildings in Kowloon East were renting at HK$29 per square foot.

The solid growth in rental last year was supported by rising business demand as well as tight supply, the DTZ says. Total new office supply was only 1.67 million square feet last year, similar to 2009 but well below the 6.6 million square feet in 2008.

DTZ office director Andy Yuen forecasts the total new supply of office space will be 3.26 million square feet this year. "New supply makes a welcome return to Central and Admiralty after a long absence, but the scale of supply in the core business district remains scarce and is not expected to relieve the tight vacancy considerably," he said.

Although more choice will be available in fringe areas such as Island East, Kowloon East and Island South, the estimated average new supply between 2011 and 2014 will be just 1.92 million square feet, much tighter than the average of 3.15 million between 2007 and 2010, Yuen predicts. "The increasing demand accompanying economic progress is set to strain the supply side and support rental growth," he said. — SCMP
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