Nov. 9 (Bloomberg) -- An office property in Hong Kong’s Central business district sold for a record HK$25,581 ($3,300) per square foot as vacancies drop in the world’s second-most expensive market, according to Knight Frank LLP and Savills Plc.
The 79th floor of 99 Queen’s Road Central sold for HK$338 million ($43.6 million) to Excel Fine Holdings Ltd. on Oct. 25, government Land Registry records show. The floor has an area of 13,213 square feet, according to marketing materials from Magic Ace Co., the seller.
“The low interest rate and hot money situation in Hong Kong mean the robust trend will continue in the office property sector,” said Dominic Chung, senior director of investment properties at CB Richard Ellis.
Hong Kong’s Central commands the world’s second-highest occupancy costs, including rent, taxes and service fees, behind London’s West End, CB Richard Ellis Group Inc. said in a May report. Prime office rents in the city have jumped 16 percent in the last year as financial companies such as HSBC Holdings Plc and Barclays Plc resumed expanding amid an economic recovery.
The previous record was HK$24,950 per square foot for a whole floor in Nine Queen’s Road Central bought by a local investor for HK$343.5 million, according to the November Hong Kong prime office report by Knight Frank.
“Office demand is robust” from investment banks and China-based companies, according to the report. “The supply-demand imbalance is unlikely to ease in the short term.”
Hong Kong’s Costs
Occupancy costs in Hong Kong were $153.20 a square foot in the year to March 31, compared with $182.94 a square foot in London’s West End, according to CB Richard Ellis, the world’s biggest real-estate services firm.
“It’s the lack of supply and lack of land for new supply,” said David Ji, head of Greater China research at DTZ, a real-estate consulting company. “I don’t see any downward pressure on prices. The attraction to move out is limited.”
Hong Kong’s jobless rate fell to 4.3 percent, the lowest level in 19 months, for the three months ended July 31. The city’s number of financial professionals rose to a record 37,694 by July, eclipsing the previous high reached in November 2008, the Securities and Futures Commission said in August.
“The demand is huge for office properties,” said Cusson Leung, a Hong Kong-based analyst at Credit Suisse Group AG. “You won’t see the key Hong Kong landlords selling their core operations. Individual owners may be more opportunistic.”
Higher Office Rents
The Zurich-based bank doubled its forecast for growth in office rents in Hong Kong to 30 percent in 2011, from 15 percent previously, to reflect a further decline in vacancy rates, Leung and Joyce Kwock wrote in a report to clients dated today.
Residential property prices will likely gain 30 percent from now until the end of 2011 because of a weaker dollar will boost asset inflation, Leung and Kwock wrote in the same report.
The city’s home prices more than doubled from a trough in 2003 on a recovering economy, low interest rates, and an influx of mainland Chinese buyers whose travel restrictions to the city have been gradually relaxed. Concerns that housing may become unaffordable for the majority of the population led to government curbs last month to rein in prices, including eliminating residency offers to foreigners who buy property and a plan to build more apartments for first-time home buyers.
“As the residential market has gone up, the liquidity will be rotating around and some of the money will be chasing alternatives,” the Credit Suisse analysts said.
The English-language Standard newspaper reported the transaction earlier today.
To contact the reporter on this story: Debra Mao in Hong Kong at email@example.com