High-end office rents remain soft

Premium office rents fell further in the third quarter with the average rate tumbling 23% from its peak level in 2008.

Property consulting firm DTZ noted that the average rent in the most prestigious office buildings in Central and Admiralty, including Two International Finance Centre and Cheung Kong Centre primarily occupied by financial, insurance, real estate and business services sectors, stood at HK$130 per square foot in the third quarter of 2012, down from the HK$131 per square foot from the second quarter and the previous peak of HK$168 per square foot in 2008.

Central and Admiralty are the only areas that recorded lower rents in the third quarter. Rents have fallen over the past 12 months since 2011. Average office rents stood at HK$106 per square foot in the third quarter, down from HK$107 in the second quarter and the peak of HK$122 in 2008.

The relatively high vacancy rates in Central and Admiralty have also driven the landlords to reduce rentals to retain the tenants.

Take-up in the prime area dropped over 38,000 square feet in the third quarter after a miniscule gain of 5,700 square feet in the previous three months. Average vacancy rates of the buildings in Central and Admiralty has reached 6.6% in the third quarter, the highest area throughout the city. This was five times higher than the 1.1% during the peak in 2008.