PRLog (Press Release) –
Jul 24, 2009 – According to the latest research report issued by Knight Frank, a stabilisation in demand coupled with a sharp rent fall in the past nine months indicates that the downturn in the office leasing market may come to an end sooner than expected. Knight Frank says Grade-A office rents will bottom by the fourth quarter of the year.
Mr Mark Bernard, Executive Director of Commercial Sales & Leasing Department at Knight Frank, says, “A number of positive signs have emerged recently, indicating that the demand for offices might be stabilising. The number of newly launched hedge funds reportedly increased from four in the first quarter to ten in the second quarter. Certain small financial companies that previously wanted to surrender part of their office spaces withdrew their decisions, due to improving business volume. A wave of new listings in the local stock market is also forthcoming in the second half of the year. This revival of financial activity will lend support to the demand for office space.”
Grade-A office rents in Hong Kong dropped 8.8% in the second quarter, an improvement on the 14.9% decline during the first. In June, office rents fell an average of 3.0% and there were further signs rent levels were stabilising in some non-core areas. For example, rents in Quarry Bay dropped a mere 0.4% — the least among all major business districts, followed by Kowloon East and Tsim Sha Tsui, where rent levels fell 1.1% and 1.7%, respectively.
A number of major deals were recorded in non-core areas last month. Manulife confirmed its take-up of eight floors in Kwun Tong 223, with a total area of 240,000 sq ft; Census and Statistics Department committed to three floors covering 50,000 sq ft in Landmark East in Kwun Tong; while Bausch & Lomb, a contact lens and eye-care retailer, leased 10,000 sq ft of space in Manhattan Place in Kowloon Bay. As business confidence improved, office expansion was also seen in core areas. One example involved a law firm that leased 33,000 sq ft of space in Edinburgh Tower in Central.
In the sales market, the number of large-scale transactions increased substantially in the second quarter. Major deals in the past month included 18 floors of Cyber Plaza in Tsim Sha Tsui, acquired by Fancy Trend Investment for HK$254.4 million or HK$4,240 per sq ft as well as the en-bloc transaction of Continental Diamond Plaza in Causeway Bay, which changed hands for HK$838 million or HK$18,217 per sq ft. Another en-bloc transaction involved Po Sang Bank Building in Mong Kok, which was bought by Moral Winner Investment for HK$250 million or HK$5,702 per sq ft.
Office sales activity has bounced back to levels last seen before the onset of the recent financial crisis. There were over 280 sales transactions in June, representing a 70.0% month-on-month rise and the highest level since early 2008. Total sales in June were triple the value of the previous month. However, activity slowed down significantly in early July, as buyers adopted a wait-and-see attitude after having witnessed a surge in office prices for four consecutive months.
“The capital values of offices continued to surge. After rising 15.2% in May, the average price of Grade-A offices grew a further 8.9% last month. By the end of June, office prices had rebounded by about 40% from the trough in February, outperforming the prime retail and luxury residential sales markets.” Mr Bernard continues.
Mr Bernard concludes, “However, the Grade-A office sales market may enter a consolidation period and sales activity is expected to slow in the near term, as the recent price surge has already priced in a significant improvement in the real economy. ”
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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.
