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Peggy Ye

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.
The firm’s revenue climbed 8 per cent to HK$9.41 billion and its reported profit swung to HK$3.63 billion from a loss a year earlier, supported by stabilising office valuations, resilient rental income and HK$1.21 billion in profit from the sale of two luxury houses on Deep Water Bay Road.

The strongest gains have been in Central, where Hongkong Land – the district’s largest office landlord and owner of the Landmark luxury retail complex – reported an 11 per cent increase in underlying profit last week as stronger demand from financial firms pushed average office rents higher.
Wharf REIC, by contrast, highlighted the challenges facing landlords outside Hong Kong’s financial core. The company owns Harbour City, the premier shopping centre in Tsim Sha Tsui, and Times Square, one of Causeway Bay’s biggest retail and office complexes.
Wharf REIC’s underlying net profit rose 6 per cent to HK$3.31 billion, largely because finance costs fell 37 per cent, but it still reported a net loss of HK$176 million after a HK$3.55 billion property valuation deficit.
But the firm’s office portfolio remained under pressure. Harbour City’s office occupancy improved to 93 per cent, although rents remained weak, while Times Square was 89 per cent occupied as landlords competed with abundant new supply and lower-cost alternatives.
Outside the office market, luxury retail has become an important source of support.
Swire’s Hong Kong shopping malls remained fully occupied and its gross retail rental income rose 3 per cent to HK$3.77 billion. Retail sales at Pacific Place climbed 15 per cent, producing the mall’s strongest May on record as spending on luxury watches, jewellery and gold strengthened among local shoppers and tourists.
Wharf REIC also benefited from a recovering tourism sector and an increase in discretionary spending. Harbour City maintained 92 per cent retail occupancy as luxury brands expanded their presence, while Times Square held at 95 per cent.
“Looking ahead, steady inbound tourism and a stabilising residential property market, which should provide positive wealth effect, are expected to support consumer confidence and domestic spending,” Wharf said in the earnings statement.
“Although market conditions are expected to remain competitive, the positive performance across our business reinforces our conviction in the strength and resilience of our portfolios,” said Swire’s Blackburn in the statement.


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First-half results highlight a widening gap between Central’s office recovery and weaker commercial districts


First-half results highlight a widening gap between Central’s office recovery and weaker commercial districts.


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

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}First-half results highlight a widening gap between Central’s office recovery and weaker commercial districts

First-half results highlight a widening gap between Central’s office recovery and weaker commercial districts