Hongkong Land reported higher underlying profit in the first quarter of 2022 compared with year-earlier levels, as a rise in completions from its development pipeline in mainland China offset COVID-led weakness in the group’s office and retail portfolios at home.
The fifth wave of the pandemic reversed an increase in Hong Kong office leasing activity since the second half of 2021, Hongkong Land said Thursday in an interim management statement. Physical vacancy rose to 5.6 percent in the first quarter from 5.2 percent at the end of 2021, while committed vacancy edged up to 5 percent from 4.9 percent.
“Rental reversions continued to be negative in the period,” said the group best known for its prime office portfolio in Central district, including Jardine House and the Exchange Square complex.
On a more upbeat note, Hongkong Land pointed to signs of a recovery in office leasing activity by late April as anti-COVID measures eased. The rally mirrored findings in JLL’s Hong Kong Property Market Monitor report, which calculated overall net absorption in the city at 249,000 square feet (23,133 square metres) last month, including a mainland bank doubling its presence at Hongkong Land’s One Exchange Square by taking up 13,800 square feet.
The developer chaired by Ben Keswick said its Landmark retail portfolio in Hong Kong continued to suffer a lack of overseas visitors in the first quarter, with tenant sales lower than in the comparable period of 2021, as social-distancing measures reduced footfall and restricted the operating capacity of restaurants. Physical and committed vacancy in retail remained low at 0.4 and 0.3 percent respectively, Hongkong Land said.
Market sentiment in mainland China for the group’s residential development properties “remained cautious” in the quarter despite the relaxation of cooling measures. Adjusted for attributable interest, contracted sales totaled $213 million, down from $410 million in the year-earlier period.
While the group’s mainland Chinese property completions gave a lift to underlying profit in the first quarter, the full-year figure is seen declining due to the timing of sales completions.
Singapore continues to be a bright spot for Hongkong Land, with physical vacancy in the group’s office portfolio falling to 5.6 percent in the first quarter from 6.5 percent at the end of 2021. Committed vacancy inched up to 3.1 percent from 2.9 percent, but rental reversions were positive amid improving sentiment as travel restrictions eased in the city-state.
Sales demand was strong at Piccadilly Grand, a joint residential project of subsidiary MCL Land and City Developments Ltd near Singapore’s Little India neighbourhood, with buyers snapping up 351 of 407 total units at this month’s launch. In February, MCL Land acquired a 49 percent interest alongside CDL in a Tanjong Katong residential site expected to yield 640 units for sale.
The recent emergence of COVID-19 cases and related restrictions in mainland China has curtailed some sales and development activities, Hongkong Land said. The impact of the restrictions on full-year results will depend on how long the curbs remain in place and the extent to which construction progress on development properties is affected.
Pandemic realities have led Hongkong Land to explore development alternatives, including the group’s first-ever logistics venture with Indonesian sister firm PT Astra International and warehouse specialist Logos Property.
Announced in February, the platform will develop and manage warehouses in Southeast Asia’s largest economy, with the two Jardine Matheson-controlled firms participating through their existing PT Astra Land Indonesia joint venture.
Participation in the platform with Logos will further diversify an Asia portfolio in which Hongkong Land already holds 9.4 million square feet of completed office, retail and residential properties.