Meeting takeaways : A mixed bag
- Central office vacancy should remain stable but negative reversionary growth persists
- COVID lockdowns in China saw construction delays, leading to deferral of booking of development profits
- Acquired a residential site in Shanghai through a joint venture recently
In Hong Kong, office leasing momentum had been improving until the fifth wave of the COVID outbreak. Leasing demand had slowed amid the COVID resurgence but enquires are picking up after easing of COVID restrictions. About 18% of office leases are scheduled for expiry or subject to rent reviews in 2022. Given the number of deals already concluded, the vacancy level should remain stable this year. But reversionary growth should remain negative in the year given high expiring rents and could return to positive territory in 2024.
The Central retail portfolio remains fully let. In response to the COVID-led social distancing measures, Hongkong Land has provided modest rental support to its tenants, mainly in the F&B sector.
In Singapore, office demand is in good shape. Higher rentals were achieved upon lease renewals or new lettings. With continued positive reversionary growth, average passing rent is set to increase further.
On the residential side, residential demand remains solid despite cooling measure introduced in late 2021. This is evidenced by the sales response to the company’s new project launch recently.
In China, residential sales momentum was subdued due to the COVID lockdowns. Construction works was also impacted, particularly in Shanghai. The West Bund project was delayed for three months. Completion for Galaxy Midtown will be deferred to 2023 from late 2022. This would impact the delivery of the projects and hence result in the slippage of booking of residential profit.
Recently, a consortium in which Hongkong Land has a 34% stake acquired a residential site adjacent to the West Bund project in Shanghai for Rmb4.73bn.
Last year, the company acquired most of the residential sites in China at the reserve prices. Hence these projects should offer healthy margins.
Hongkong Land has spent c.US$450m on share buybacks since it announced the US$500m share repurchase program in Sep-22. The company has yet to decide whether to renew the share buyback program after the current program ends.