DTZ Sees HK Office Rents Falling Next Year

Source : The Business Times, December 9, 2008

(HONG KONG) Hong Kong office rents may fall in 2009, as the global financial crisis hurts the city's economy, property adviser DTZ Holding plc said.

'Office rents in Hong Kong, especially those for grade A offices, would be mostly affected as their tenants such as investment banks and finance companies are badly hit in the global financial turmoil,' Leung Chun Ying, chairman of DTZ in Asia-Pacific, told reporters in Hong Kong yesterday.

The credit market seizure that has left global financial companies with almost US$1 trillion in writedowns and credit losses has led to banks such as Citigroup Inc and DBS Group Holdings downsizing their businesses and cutting jobs in the city.

Hong Kong has slipped into its first recession since the severe acute respiratory syndrome epidemic in 2003 as the economy shrank a seasonally adjusted 0.5 per cent in the third quarter from the previous three months, after contracting 1.4 per cent in the second quarter.

CLSA forecast a 60 per cent decline in rents in the city's central business district in the next two years, while UBS forecast a 25 per cent drop by Sept next year, the South China Morning Post reported on Nov 19, citing property analysts. Central office rents surged to a peak of HK$120 (S$23.61) per square foot this summer, the report said.

'It's difficult to predict the magnitude of the consolidation in office rents as the impact of the financial turmoil hasn't been fully reflected,' said Mr Leung.

Separately, Hong Kong ranked third, after Tokyo and Singapore, in the top five cities in terms of investment prospects, says a survey by Urban Land Institute and Pricewaterhouse Coopers.

The rankings implied that those markets have long-term investment values, though many see volatilities in the short term, said Mr Leung, who is also the institute's Asia chairman. -- Bloomberg