Swire Properties Sustains Strong Occupancy at Pacific Place as Rents Drop 16%

Swire Properties reported 97 percent occupancy at Pacific Place in Hong Kong’s Admiralty area at the end of June, easing from 98 percent at the end of last year, as rents at the flagship office complex tumbled 16 percent for the six-month period.

Monthly rents at the One and Two Pacific Place office towers fell to a range of HK$90-HK$100 ($11.57-$12.85) per square foot from HK$100-HK$110 a year earlier, according to a second-quarter operating statement released by HKEX-listed Swire Properties. Three Pacific Place rents dipped to HK$85-HK$95 per square foot from HK$90-HK$100 a year ago.

The Pacific Place complex, which links directly to Admiralty MTR station through the luxury Pacific Place mall, is located just east of Central and 650 metres (711 yards) from The Henderson, a new Zaha Hadid-designed office tower that Henderson Land is set to open this quarter, with tenants having leased space there for reported rates of HK$100 per square foot.

Swire Properties — the owner of 32 percent of Admiralty’s private office stock, according to consultancy JLL — is due to release its 2024 first-half results later this month. The real estate arm of centuries-old trading firm Swire Pacific posted a 67 percent decline in attributable net profit to HK$2.6 billion in 2023, stung by fair value losses on investment properties, while underlying profit rose 33 percent.

City Portfolio Stable

Occupancy at One Island East and One Taikoo Place, the highest-specification office towers at Swire’s Taikoo Place complex in Quarry Bay, improved to 94 percent from 93 percent at the end of December. Rents fell 9 percent for the six-month period, lately settling between the mid HK$50s and the high HK$60s.

The older buildings in Taikoo Place, including Lincoln House, Dorset House and others, saw occupancy rise from 90 percent to 92 percent in the period as rents slid 13 percent and recently stood between the low HK$40s and the high HK$40s.

The overall Hong Kong office portfolio’s occupancy held steady at 93 percent after showing the same reading at the end of 2023.

A substantial reduction in asking rents or a price war are unlikely to occur in the city’s prime office areas, JLL Hong Kong leasing advisory head Alex Barnes said in a market update.

“A significant share of the office supply in the traditional business districts is dominated by a small number of major landlords, granting them substantial holding power,” Barnes said.

Rival’s Red Ink

Swire’s announcement comes after rival Hongkong Land last week posted a six-month attributable loss of $833 million, with the Jardine Matheson-controlled developer more than doubling its shortfall from the same period a year earlier.

The biggest landlord in Hong Kong’s Central district recorded half-year gross rental income of $691 million, staying relatively flat with the comparable period last year, while fewer project completions and a $295 million provision on its mainland China development properties took a toll.

Hongkong Land’s underlying business recorded a half-year attributable loss of $6.9 million, compared with a $422.2 million profit for the corresponding period last year.