Swire earnings show Hong Kong’s prime commercial districts outpacing others in recovery

Hong Kong’s commercial property recovery is increasingly becoming a story of location, with the fortunes of the city’s biggest landlords diverging depending on the districts where they own office space.

Swire Properties’ first-half results on Thursday captured that shift. The developer owns office towers in both Admiralty, next to Central’s financial district, and Quarry Bay, an eastern business hub that has long attracted tenants seeking spaces with lower rents than those in pricier areas like Central.

Pacific Place, Swire’s mixed-use complex beside Central, was 98 per cent occupied and recorded selective signs of positive spot rents as banks, asset managers and other financial firms renewed leases and upgraded into premium offices.

At Taikoo Place in Quarry Bay, however, an abundance of new supply and increased vacancies kept leasing conditions competitive. The occupancy rate for One Island East and One Taikoo Place was 91 per cent, while the district’s newest office tower Two Taikoo Place was 80 per cent leased.

Swire chief executive Tim Blackburn said occupiers continued to move into “better located, more sustainable and amenity-rich office space”, highlighting a “flight-to-quality” trend that has become a defining feature of Hong Kong’s office market. Rather than expanding, many companies are using lower rents to relocate into higher-quality buildings.

That divide is increasingly showing up in landlords’ earnings.

Swire’s underlying profit rose 11 per cent to HK$4.9 billion (US$624.7 million) in the first half, while recurring underlying profit increased 36 per cent to HK$4.66 billion. The overall occupancy rate for its office portfolio was 90 per cent.