Despite recording the sharpest decline in office rent over the 12 months to June 2012, Hong Kong is still the most expensive place to set up shop, said CBRE.
Office rents in Hong Kong may have shrunk over the past year, but the region still remains the most expensive place for commercial tenants in the world.
This was the latest findings by commercial real estate firm CBRE, which said that the famously high office rentals of Hong Kong fell 17% from Q2 2011 to Q2 2012. This was the largest drop out of 133 countries surveyed by CBRE, which added that global uncertainties were the primary cause for the fall.
However, commercial spaces in Hong Kong remain the most expensive in the world, with office rents costing USD 249 per sq ft. In comparison, office space costs USD 220 per sq ft in London's West End, the second-most expensive office market in the world.
That Hong Kong should remain firmly in the lead despite the price decline should come as no surprise. The city is a renowned global financial hub and has close proximity to mainland China, which is increasingly viewed as the most crucial economic driver in the current difficult period.
Rents continue to be kept high due to a lack of supply, said Rhodri James, CBRE's executive director of office services. The government has allowed just 0.4% of Hong Kong's land mass to be developed for commercial usage so far. Land releases have been scant, as the government is fearful of triggering a fall in prices, like what happened during the 1997 Asian financial crisis.
However, James thinks that Hong Kong can benefit from the drop in prices. "Far from diminishing the city's status as Asia's financial hub, (falling office rents can make Hong Kong) more competitive and relatively more attractive for international tenants," he said.
In addition, Leung Chun-ying, the newly sworn in leader of Hong Kong, has pledged to boost land supply during his five-year term as part of an overall plant to diversify the city's economy. Hong Kong's economy is dominated by finance and tourism.