1.

Hong Kong boasts low corporate and income tax, a stable government, excellent geographical location and economic freedom. As such, many international companies have made Hong Kong their headquarters, contributing to traditionally strong demand in the Hong Kong commercial property market. There are no restrictions on any individual or corporation, whether domestic or overseas, to own Hong Kong real estate. Detailed information can be found on the Hong Kong Inland Revenue Department website.

2.

Hong Kong commercial property market prices improved with capital values for strata-title office buildings in main business districts increasing in the 2nd quarter of 2009.

3.

Kowloon East (KE) a new Grade A office development which has lead many businesses to migrate from traditional business districts in Hong Kong to KE to benefit from rental savings. Industries based in wholesaling and distribution have moved towards Kowloon Bay to take advantage of the vacant space and lower rent. Vacancy in KE and the large number of expiring leases has lead to an average 12.1% quarter-on-quarter decline to HK$41.79 (US$5.40) per sq ft per month at the end of May 2009.

4.

Increases in property values have not reversed the declining rental yields as recessionary impacts have caused businesses to become wary of major capital expenditures and investments. Vacancy rates in Grade A offices have risen to 7.86% in May 2009 due to downsizing, further cost-cutting and companies downgrading to second-tier office space.

5.

The current economic climate has made it increasingly difficult to obtain finance to support Hong Kong commercial property market investment. Asia Property Consultants assists clients obtain the most competitive international mortgages for their investment by working with international banks such as HSBC, ANZ Bank, DBS Bankand OCBC Bank.

6.

KE was one of few to experience a fall in vacancy rates during the 2nd quarter of 2009, falling from 29.3% in February to 26.4% in May 2009. While the vacancy rates in the traditional business districts such as Wanchai, Causeway Bay, Island East and Central Hong Kong are significantly lower than Kowloon East, there is a distinct movement of companies who are intent on reducing expenditure in the current economic environment.

7.

The Asia Pacific Region is expected to see a 2% increase in occupancy costs over the next 4 years. Hong Kong has become one of the most expensive business hubs to establish a business in and is expected to surpass Tokyo in regards to occupancy costs.  Even though occupancy costs per workstation have declined by 22% in 2009, Hong Kong still remains as one of the most expensive locations in the Asia Pacific Region. According to DTZ Global Occupancy Costs Report 2010, Hong Kong’s Total occupancy cost per workstation per annum is US$16,970.

8.

Future Trends: New office space demand in the short-term will be weak. Tenants are likely to continue to try and decrease costs while Landlords continue to decrease rental charges to maintain lease renewals.  Investors in KE will continue to offer lease incentives to further increase the occupancy rate of the area, which will push average rental declines in other areas. Collier International reports that Grade A office retail rents are expected to decrease by 15% over the next year unless economic recovery is faster than expected.

For more information on the Hong Kong real estate, call our Hong Kong office at (+852) 8331 1911 or contact us at email@healyconsultants.com