Journalist for the Business Daily newspaper 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 to those in 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 three 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 HK$42 per square foot at AIA, HK$53 at FBC, HK$40 at FIT and HK$43 at Circle Square. It’s important to note that these figures are based on net square footage of the space, based on an efficiency ratio of 70 percent, and are exclusive of management fees which are around HK$5 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 HK$40 psf plus HK$5 psf for management, which works out to be just over HK$660,000 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 HK$165 a square foot, net effective. One IFC for example, has a similar sized office space as the FIT one mentioned above, currently available for rent, asking, for rent and management, a total of HK$3.45 million, per month!
That makes Macau office rents, in centrally located grade A buildings, only 20 percent the cost of that in Hong Kong.
But we’ve only got three 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 located in Grade B buildings, such as Macau Square, the Luso Building, 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 HK$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 Macau Tower and over towards the new Immigration building in Taipa.
In time, I suppose over the next seven to eight years or so, if not sooner, this will mean a hollowing out of great swathes of office space in downtown 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 banking and legal Big Boys could use as ‘satellite offices’ for their back of house and support staff? Having to pay only 20 percent 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 Hong Kong 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 truly been assimilated into China by then?
