THE ECONOMY
cutting measure. In order to uphold the occupancy rate, landlords generally offered larger rental cuts, longer rent-free period and other concessions to their tenants. On a quarter-to-quarter comparison, office rentals on average fell by 6 per cent, 5 per cent, 2 per cent and 2 per cent respectively in the four quarters of 2002. For the year as a whole, office rentals on average dipped by 13 per cent. The sales market for office space was stagnant in 2002. Reduced rental yield against the heavy capital investment up-front had led potential purchasers to stay on the sideline. On a quarter-to-quarter comparison, prices of office space were static in the first and third quarters of 2002 but were lower on average by 3 per cent in the second quarter and 5 per cent in the fourth quarter. For the year as a whole, there was on average a fall of 8 per cent. Against their respective peak levels in 1997, prices and rentals of office space both plunged, by an average of 71 per cent and 48 per cent in the fourth quarter of 2002 (Chart 18).
Chart 18
Prices and rentals of office space (1999=100)
Index
250
Price index
200
150
100
50
Rental index
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
1997
1998
1999
2000
2001
2002
62
Prices and rentals of office space remained on a distinct downtrend during 2002, amidst further downsizing and rationalisation in the business sector.
The rental market for shopping space was slack in 2002, as demand remained languid amidst a continued setback in the retail trade. Space in well-managed shopping arcades and in the popular shopping districts was nevertheless better sought after. On a quarter-to-quarter comparison, shop rentals on average went down by 3 per cent and 1 per cent respectively in the first two quarters of 2002, yet held steady in the third and fourth quarters. For the year as a whole, there was on average a 5 per cent drop. The sales market for shopping space remained quiet in 2002, as investors. continued to adopt a cautious attitude in the face of subdued conditions in the retail trade and an uncertain near-term outlook. On a quarter-to-quarter comparison, prices of shopping space, having on average held steady in the first quarter of 2002 and edged up by 3 per cent in the second quarter, fell by 1 per cent and 4 per cent respectively in the third and fourth quarters. For the year as a whole, there was on