Rents Of Hongkong Land’s Office Bldgs In Central Have Bottomed Out

HONG KONG – DBS Group Research analyst Jeff Yau revealed that the office market downturn in Central, particularly in commercial properties owned by Hongkong Land, showed signs of bottoming out before the recent COVID-19 outbreak, reported The Edge on Monday afternoon (7 March, SGT).

Notably, the real estate developer’s flagship properties consist of premium office buildings and high-end retail space in Hong Kong’s Central.

However, he believes that Hongkong Land’s retail rental income for the present fiscal year will continue to be impacted by the virus outbreak.

Nonetheless, Yau is upbeat that Hongkong Land’s Central office portfolio is set to gain from demand arising from the “flight-to-quality” trend.

However, he warned that further decline in leasing demand for both the developer’s commercial properties in Hong Kong and Singapore will negatively affect the real estate developer’s profits.

Meanwhile, CGS-CIMB noted that Hongkong Land has accelerated its landbanking activities in China, while other mainland Chinese property developers remain restrained.

For FY2021 alone, Hongkong Land has purchased 9 projects for development in China, revealed CGS-CIMB analysts Will Chu, Steven Mak, and Raymond Cheng in a report published on Saturday (5 March).

Including the West Bund project in Shanghai, the developer has 12 investment properties in China that are expected to be completed between FY2023 and FY2026. These 12 projects have a planned gross floor area (GFA) of 1.1 million sq m. Upon completion, these are anticipated to provide Hongkong Land with higher recurring income.

But because of the slower recovery of the developer’s office rents in Singapore and Hong Kong, the CGS-CIMB analysts have slashed their target stock price of Hongkong Land from US$6.30 to US$6.1, but kept their “add” call.