Macau Vs Hong Kong – how do they compare when it comes to office rentals?
Journalist for Macau Business News Sheyla Zandonai called me the other day for information on office rentals in Macau. She was writing an article on how our rental rates compare with that of Hong Kong. And her focus was specifically on ‘Grade A’ buildings.
Firstly the question begs, what constitutes grade A? Not all office buildings are the same, which is why a general classification system exists to categorize them by age, amenities, aesthetics (higher ceilings, large central lobby) and general infrastructure. Some experts argue that the classifications are subjective. So we agreed to go with newly constructed, outfitted with top-of-the-line fixtures, amenities and systems, maintained by a reputable property management company to keep them looking impeccable, parking and desirable, central location in down town Macau. This left us with 3 main buildings to focus on, namely AIA, FIT and FBC in Nam Wan, with possibly Circle Square opposite Senado Square that could be added to the mix.
I gave her some current numbers: monthly rents being asked for these days are HKD42 per square foot, at AIA, HKD53 at FBC, HKD40 at FIT and HKD43 at Circle Square. Important to note that these figures are based on net square footage of the space, based on an efficiency ratio of 70%, and are exclusive of management fees which are around HKD5 per square foot, net, per month.
So for example, there’s a 14th floor unit in the FIT building that’s 14,700 square feet (net) available for rent, which at HKD40 psf plus HKD5 psf for management, works out to be just over HKD660,000 per month.
Compare this with Hong Kong, just an hour away. According to a report published last month by commercial property consultant Knight Frank, Hong Kong topped the list of the world’s most expensive rentals. Renting prime office space on the upper floors of a high rise in the Central business district costs an average of HKD165 a square foot, net effective. One IFC for example has a similar sized office space as in the FIT above, currently available for rent, asking, for rent and management, a total of HKD3.45 million, per month!
That makes Macau office rents, in centrally located A grade buildings, only 20% of the cost of that in Hong Kong.
But we’ve only got 3 buildings that could be compared pretty much apple to apple, and so space is tight. But it got me thinking …..
Word is that the Macau government is tired of paying millions each month for the rent of their offices in downtown, but Grade B, buildings, such as the Macau Square, Luso Building, the China Plaza, and some in NAPE. The Secretary for Economy and Finance Lionel Leong Vai Tac disclosed last November that the government would need to spend over HKD 1 billion to rent private venues for only this year. So plans are afoot to build their own office space (believed to be on reclaimed land adjacent to the Macao Science Centre, on land around the Macau Tower and over towards the new Immigration building. In time, I suppose over the next 7-8 or so years if not quicker, this will mean a hollowing out of great swathes of office space in down town Macau, and naturally rents in the Grade B buildings will drop. If the Grade A rents stay firm, they stand to lose tenants to the lower priced Grade B offices. Altogether there will be a slide in the office rents which will further widen the gap between Macau and Hong Kong.
Does this not, then, present an opportunity for Macau to market itself as a commercial hub for Hong Kong, that the global bank and legal Big Boys could use as ‘satellite offices’ for their back of house and support staff? Having to pay only 20% of Hong Kong rents here would surely be a big draw, especially with the new bridge coming on line soon, the vast immigration complex we see being built to cope with thousands passing through it each day, the ease that HK ID holders have to pass back and forwards between Hong Kong and Macau and the promised, improved, infrastructure.
It’s a thought. I mean, both Macau and Hong Kong are part of China, we’re all supposed to be part of the amazing Pearl River Delta developments unraveling in front of our very eyes, part of the bigger picture. Borders must surely blur over the next 20, 30, 40 years … I really do wonder how things will look then. Will we have fully assimilated into China by then?