Firms squeezed out as rents soar in Central

HONG KONG: Government plans to increase the supply of commercial land outside prime areas are unlikely to help ease soaring office rentals in the core office district in Central, property developers and analysts say.

Critics of the government plan call instead for additional office space to be made available in Central, where grade-A office asking rents have risen to as much as HK$207 (RM80.73) per square foot recently.

"Surging grade-A office rents in Central are being driven largely by demand from international financial services companies. Therefore, the immediate solution is to add more land for sale in the prime business district," said Charles Chan Chiu-kwok, managing director at Savills Valuation and Professional Services for Greater China.

So long as there is no improvement in the supply shortage in core Central, office rents — which were bid to a high of HK$207 per sq ft in the International Finance Centre last month — will continue to rise, said Chan.

Rising rents are forcing some tenants out of the area and among those joining the exodus was mortgage financier Leland Sun, who moved part of his operation to Wan Chai, from Central, a year and half ago.

"This year I have decided to move myself and a few other colleagues to Wan Chai as well. The increasing rental costs are definitely driving out small to medium-sized enterprises from grade-A office buildings in Central and other parts of Hong Kong," said Sun, managing director of Pan Asian Mortgage Group.

For most businesses, revenue and bottom-line growth had failed to match rising rental costs, he said, forcing them to relocate to lower rent premises outside of the core office district.

Financial Secretary John Tsang Chun-wah last Wednesday announced the government would release five commercial and business sites for auction in the next financial year (from April 1 this year, to end-March next year). By his estimate the land could be developed into 600,000 square metres of office space.

The sites are in Kwun Tong, Kowloon Bay, Tin Shui Wai and two in Sha Tin, and Midland Surveyors expects they could together generate total bids of some HK$8.4 billion.

Two bigger sites, one in Kwun Tong and the other in Kowloon Bay, would attract most attention from bidders, said Midland.

It expected that a 0.7-hectare plot at the junction of Wai Yip Street, Shun Yip Street, and Hoi Bun Road in Kwun Tong could be sold for around HK$3.4 billion, while a 0.66-hectare site at the junction of Kai Cheung Road and Wang Kwong Road in Kowloon Bay, could fetch around HK$3 billion.

All five sites will be ready for sale from as early as April 11.

Meanwhile, the former Police Station and Police Married Quarters in Wan Chai will be offered for tender as early as December. The 0.38-hectare site is designated for hotel-commercial-community and cultural purposes.

Besides, there are eight commercial and business sites on the application list that available for trigger for auction, bringing the total to 14. — SCMP

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