Hong Kong skyscrapers continue to be the most expensive commercial real estate in the world, according to property consultancy firm Knight Frank.
Their capital values are about US$6,330 per square foot this year, 50 percent higher than those in Tokyo, which ranked second among 15 metropolises in the company’s annual Global Cities report.
Thomas Lam, Knight Frank senior director and head of valuation and consultancy, said it would be difficult to say when Hong Kong prices will come down given the lack of land supply for new office towers.
“It takes three to four years to build a grade-A office tower. Reconstruction projects may take five to seven years… it is very difficult to resolve the shortage [of office space] in the short run,” he said.
The high prices are likely to remain until Hong Kong interest rates begin to rise when the United States Federal Reserve ends its ultra low interest rate policy, he said.
Hong Kong will have a deficit of three million sq. ft. of office space by 2020, equivalent to three office towers of Two IFC. The forecast includes projects planned for the coming few years, he said.
Meanwhile, Hong Kong has the lowest prime office yields of just 2.9 percent among the 15 cities surveyed after a surge in property prices in previous years.
Office rents are expected to rise 10 percent in the next five years after a drop of 3.2 percent in the last five, putting Hong Kong second to last in a ranking of six Asia Pacific cities including Mumbai, Shanghai, Singapore, Sydney and Tokyo.
Hong Kong’s office towers are expected to have the lowest vacancy rate of 5.2 percent in the world this year but it is expected to be overtaken by those of Tokyo and London by 2019 because of the buoyant economies in these cities.
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