Hongkong Land To Gain From Office ‘Recentralisation’
HONG KONG – Analysts from CGS-CIMB Research believe that office rents in Central are appealing enough for companies that left Hong Kong’s traditional commercial heart to return, reported The Edge on Wednesday noon (10 November, SGT).
The highlighted that office rents in Central have returned to levels seen in 2007 before the 2008 Global Financial crisis, leading to a trend called “recentralisation”, wherein occupants find it enticing to return.
“This new trend should benefit large office landlords in Central, such as Hongkong Land, in our view,” analysts Steven Mak, Will Chu, and Raymond Cheng wrote in a recent research note.
The market watchers noted that in H1 FY2021, the vacancy level of Hongkong Land’s office properties in Central reached 6.4 percent, which is better than the 7.4 percent overall vacancy in the area.
“We believe its vacancy reached a short-term peak at the end of H1 FY2021 and will moderate in Q4 FY2021 and H1 FY2022, as the government of the Hong Kong plans to reopen borders with mainland China as local COVID-19 cases have subsided,” commented the team.
As such, they identified strong rental growth in Hongkong Land’s portfolio of investment properties as a potential re-rating catalyst.
However, the prolonged border closures in Singapore and Hong Kong are key downside risks for the commercial property landlord. In addition, negative rental reversions may continue in H2 FY2021. Still, the lower rents make Hongkong Land’s portfolio competitive for acquisition or retention of key occupants.
Furthermore, the team maintained its “add” call on Hongkong Land’s shares with a higher target price of US$6.30 from US$5.70 previously.
