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As rents rise local firms continue to find hot spots where, hidden away from the crowd, they can enjoy reasonably located offices at bargain prices. Dotted around the city centre some of these buildings turn up in quite unexpected locations. They could and should be gems, but often lack the presentation required by foreign businesses.
An increasing trend is to see some small scale businesses run by foreigners, making use of these facilities. This is particularly the case with owner/managers of enterprises or with those persons who have been around the city for a while. In both cases, a combination of knowledge ¨C who to ask to find these places and a more relaxed attitude towards presentation, management and facilities, make for a suitable and often ideal alternative.
Don¡¯t be misled by rental level alone. Taking the plunge into some of this type of accommodation is just that. A leap of faith. For most businesses, it is categorically not suitable; particularly those where some of the managers might not be Chinese speakers or, in cases when client ¡®presentation¡¯ is an important issue. Dark corridors and random cleaning habits are just some of the attributes best kept away form the critical gaze of a demanding client.
Nevertheless, these buildings fulfil an excellent market ¨C the mass market for many of the local companies willing and able to operate at cost levels well below their international competition. For this factor alone, the choice of office is an eye opener in terms of different business cultures.
There will always be a large and growing stock of ¡®budget¡¯ offices and most of these will continue to be inappropriate, inconvenient or just plain difficult to find for the non-local operator. However, the expectation is with the continued rise in city centre rents, the low grade buildings of today will become the mid-grade buildings of tomorrow. As budget offices are eased out towards more peripheral areas.
The emergence of the new subway lines will also have a further and interesting impact on some of these offices. Long established buildings which, up until now, have been marginalised by their inaccessibility will be thrown into more prominent demand. In such cases, expect wayward rent swings as landlords try to adjust to the new market situation.
Increased trading in these types of buildings will likely also see the development of a deeper ¡®sales market¡¯. Recent high profile deals including Pidemco Tower (bought by Goldman Sachs) and World Trade Tower & Times Square (Merril Lynch), give an indication that foreign property companies are beginning to move into the investment market (as apposed to development). As this trend deepens expect to see a number of the ¡®ugly sister¡¯ buildings, in what now might be termed ¡®secondary locations¡¯ become targets for investors.
I wouldn¡¯t recommend foreign companies start rushing to find the very ¡®local¡¯ buildings; for most the presentation and culture are just not right. However, it is likely that with continued shortages of high quality stock in the city centre, a number of these properties will have the opportunity to offer themselves as attractive alternatives. The process will take time and require understanding, effort and investment from either the current landlords or new buyers. But, it is an area of the market which will likely see a lot of activity over the coming years.
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