The third quarter saw a further drop in prime office rents, bringing the decline to 22.6% from their 2008 high, said DTZ.
Landlords of top-grade office units in Hong Kong's prime business centre are reducing rents as investment banks and professional services withdraw amid the gloomy economic outlook. The average rate is now 22.6% lower than its peak in 2008, according to research compiled by property consultant DTZ.
Average rent for the city's most prestigious business addresses in Central and Admiralty, including Two International Finance Centre and Cheung Kong Centre - home to financial, insurance, real estate and business services providers - were recorded at HKD 130 per sq ft in Q3 2012, slightly down from last quarter's HKD 131. In 2008, the peak rate achieved was HKD 168 per sq ft.
Central and Admiralty were the only areas that recorded contraction this quarter, noted DTZ, adding that this quarter's shrinkage extends a downward trend that has occurred over the past 12 months since end-2011.
On the whole, office rents within the area averaged HKD 106 per sq ft in Q3, down from HKD 107 in Q2 and the peak of HKD 122 in 2008.
DTZ stated that firms in Central remained cautious and kept a tight rein on operating costs. Further impacting office take up in the area were decentralisation of operations and staff cuts by the financial and business-related sectors.
In the third quarter, take up in prime Central fell by more than 38,000 sq ft, after a weak gain of 5,700 sq ft in the second quarter. Average vacancy rates in Central and Admiralty were also the highest in Hong Kong, surging to 6.6%, five times more than the 1.1% recorded in 2008.
Mark Price, DTZ's head of business space in north Asia said that for financial institutions particularly jobs cuts among investment banks had become prevalent this year due to unfavourable business performances. Japan's Daiwa Securities Group Inc, and Germany's Deutsche Bank have announced job cuts in their offices in Hong Kong.
However, mainland companies continuing to expand in Hong Kong are likely to take the place of international firms exiting Central and Admiralty, propping up prime office rents.