Knight Frank bullish, Colliers forecast slowdown while DTZ not sure yet.

It's that time of the year again, when our favourite research and commercial real estate directors dust off their best suits and prepare to face the media. Having spent their holidays trolling through rental appreciation rates, take-up percentages and upcoming supply figures, and looked deep into their crystal ball, the Nostradami of the local real estate community have unveiled their predictions for the year ahead.

According to Knight Frank Research, the big news is that growth of Grade-A office rentals in Hong Kong's non-core areas will accelerate in 2008 with faster-than-expected absorptions in new office buildings such as International Commerce Centre (ICC) and One Island East in Quarry Bay . "We are particularly bullish over such non-core areas as Tsim Sha Tsui and Quarry Bay , which are expected to see a strong rebound in office rental growth in the coming year," says Xavier Wong, Head of Research, Knight Frank. "The growth of office rentals in these areas is projected to accelerate to 15 percent in 2008 from a single digit growth in 2007."

At Colliers International, Managing Director Piers Brunner is less enthusiastic. "Although the outbreak of the global credit crunch clouded the market in 3Q 2007, the solid local fundamentals as well as the sustained economic growth in the Mainland have strengthened the confidence of different business players." However, with major new supply coming from Kowloon East as well as One Island East in Quarry Bay , "The new supply cycle will be a challenge for the whole Grade A office market. Should there be any slowdown in prospective demand, rentals may face additional pressure. Over the next twelve months, we forecast rentals to slow to three percent and capital values to grow 15 percent."

Meanwhile DTZ, releasing their Global Office Occupancy Costs Survey, found that Hong Kong's Central was the world's second most expensive CBD, just behind London 's West End which still dominated as the most expensive at US$ 275.7 per sqf per annum. Hong Kong rose to second in place with occupancy costs of US$213.2 per sqf per annum (up 37.5 percent). Mark Price, Head of Business Space, DTZ refused to be tied down on exact predictions for the coming year, saying that the effects of global market turbulence on the Hong Kong rental landscape will be better understood in six months time. He did however commit to saying, "In 2008 we believe the office market in most districts will have a stable growth, while rents in Central could edge some 15 percent higher in the first half of this year, due to continuing tight supply and strong demand from the FIRE sector amid favourable economic performance in Hong Kong." RFP