One of Hong Kong's largest office landlords believes strong letting demand will rapidly feed through to increased rents, bolstering the prospects for a sector that has seen pricing power swing back in its direction.
Pacific Place tenants of Swire Properties in Admiralty can expect rents rising to above $30 per square foot as three-year leases signed during the depth of the property slump come up for renegotiation.
Keith Kerr, a Swire director and chairman of its property arm, yesterday painted a picture of extremely tight occupancy at its core holdings, where rents had fallen 75 per cent from their peaks.
Mr Kerr said the firm's Pacific Place 1 and 2 towers were 92 per cent occupied, compared with 89 per cent six months ago, while, in the generally depressed Quarry Bay market, occupancy at the Island East complex had been maintained at 84 per cent.
The sharp turnaround in the property market was illustrated by profit numbers released by the Swire Group yesterday. Despite a 6.6 per cent fall in contributions from its property division, it said it would have seen a $12 billion boost to its bottom line had it adopted the controversial new accounting standard, IAS 40, that required changes in property capital values to be booked through the income statement on an annual basis.
Swire Pacific posted a 32.9 per cent jump in net profit for last year, largely arising from its 46.5 per cent stake in Cathay Pacific Airways, which on Wednesday reported a 238.9 per cent jump in net profit to $4.41 billion.
