Prime office rentals continue plunge

Prices to drop 5% in 2013 amid furious cost cutting by financial firms.

Property consulting firm DTZ said rentals for prime office space are expected to decrease by a further 5% in 2013 after plummeting 20% so far this year. It noted that financial firms, the main tenants of the city’s priciest office space, are expected to continually cut costs amid a generally weak economic recovery.

DTZ said Grade A office rentals in the prime Central/Admiralty area registered an average of HK$127 per square foot a month in the fourth quarter this year, down 2.3% from the previous three months. Rents have fallen 17.5% from HK$154 per square foot in the last quarter of 2011.

Rentals of these most prestigious buildings in Hong Kong have slumped about 24%, according to DTZ. There is still room for another 5% price correction of office rentals in the Central/Admiralty areas next year, it said.

Overall office rents in the Central/Admiralty areas have declined 13% year-on-year to HK$104 per square foot in the fourth quarter from HK$120 in 2012, with the average vacancy rate now climbing to 6.7% compared with rates of 5.3% and 1.1% in the fourth quarter of 2011 and the previous peak in 2008, respectively.

The rental slump in the Central/Admiralty areas weighed on the overall Hong Kong office rents causing them to drop by 9% year-on-year to HK$61 per square foot in the fourth quarter.