The deteriorating business environment leads to cautious foreign investment expansion.
(by Li Zitian)
Hong Kong has been affected by the Sino-US trade war and the violent clashes caused by the amendment crisis, and two foreign-owned real estate agencies invariably expressed yesterday that many companies have recently moved from high-rent office buildings to lower-rent office buildings in the same district with some even decreased the floor area to reduce costs. At the same time, there are also tenants asking landlords to reduce their rents, and cases of the surrender of the lease have increased. The Owner Agency Department Director of Jones Lang LaSalle, Yim Wai-ching expresses, Henderson’s commercial building “Harbour East” in North Point is for rent, and some customers are manufacturing companies from Wan Chai due to the cheaper cost than the old site, reflecting the related cost-saving practices.
Yim Wai-ching points out that office rents have been slightly reduced this year, but Hong Kong Island East's rents have still increased, and it is predicted as the supply increases in the area many companies located in Central, Sheung Wan, Wan Chai, and Causeway Bay consider moving to Hong Kong Island East. For example, the customer who rented the entire 8th floor of Harbour East is a manufacturing company that has moved from Wan Chai due to the new site is cheaper than the old site which was HKD70 per sq ft, reflecting the customer's cost-saving approach.
Some reduced the size by 20% to 30%.
In addition, the Senior Director of the Commercial Department of Knight Frank Hong Kong, Lau Pak-man expresses, foreign tenants are cautious about the market prospects due to the impact of the Sino-US trade war and social instability, and most of them focus on saving expenses, thus many tenants moved from high-rent office building to lower-rent office buildings in the same district or even to non-core areas, or to save costs in the existing office buildings. In the past two or three months, it has been seen many tenants reduced their leases by about 20% to 30%.
Lau Pak-man points out that foreign-owned enterprises tend to renew their rents compared with surrender of tenancy, and some tenants have asked landlords to reduce rents but no successful cases of rent reduction have been found, also there has been no large-scale withdrawal of foreign capital, while the number of surrender of tenancy has increased, reflecting that they are less optimistic than before.
Knight Frank: The number of the surrender of tenancy does increase.
Lau Pak-man also points out that foreign-owned enterprises would rather maintain still more than movement, and the cost control is tighter than before, also the pace of expansion is more cautious. He predicts that the rents of Class A office buildings in Hong Kong Island will not decrease much next year, with an estimated drop of about 6% to 8%.
The company's Executive Director and General Manager also the Commercial Department Director of Kowloon District, Mak Kin-wai expresses the office leases in Kowloon have slowed. There are a lot of cases of the surrender of the tenancy. It is conservatively expected that office rents in Kowloon will continue to decline in the first half of next year, and rents will fall by 2% to 4%, and the rent of Class A office buildings will fall even more, because there is still a large amount of supply in East Kowloon that has not been fully digested, coupled with the supply from surrender of tenancy and shared workspaces.
