Offices still vacant but Hysan is optimistic
Hysan Development, the biggest landlord in Causeway Bay, remains confident about the outlook for the office market, despite the occupancy rate of its new Hysan Place development showing no major signs of improvement.
Hysan Place, formerly the Hennessy Centre, will open on Friday.
The 450,000-square-foot shopping arcade in the building has been fully let and is expected to draw 100,000 shopper visits a day.
However, the occupancy rate of the office area has remained at only 40 per cent - the same level as the middle of May.
'We are not pessimistic about the market outlook and we receive inquiries for the office space every day,' said Lau Siu-chuen, deputy chairman of Hysan.
He said Hong Kong's economic growth for this year was only about 2 per cent but would improve to between 4 and 4.5 per cent in 2013.
'Office rents will usually increase when economic growth reaches 3 per cent or higher. Also, the new supply of office space will stay at a low level in the coming two years and will increase slightly in 2015,' he said, adding that the high quality of the office space at Hysan Place was a drawcard.
Chief financial officer Roger Hao yesterday said the company continued to see upward revisions of rents for lease renewals.
Less than 30 per cent of tenants in its office portfolio are set to renew their leases this year. Most of them have been renewed and the rents have been raised by 15 to 20 per cent from the old leases signed three years ago.
Marcos Chan, Jones Lang LaSalle's head of research for Greater Pearl River Delta, said office rents in Wan Chai and Causeway Bay had rebounded 1.6 per cent in the second quarter from a drop of 1.3 per cent in the first quarter.
He said offices were still facing downward pressure in the second half as expansion and new demand for offices remained weak. He expected rents to stay firm or decline less than 5 per cent in the second half.
Hysan said yesterday that recurring underlying profit, excluding property revaluation gains and one-off items, grew 12.8 per cent to HK$748 million in the first half of this year.
Its turnover increased by 18.1 per cent to about HK$1.11 billion, including the HK$87 million rental contribution from Hysan Place.
Its net profit fell 3.2 per cent to HK$5.82 billion.
The occupancy rate of its office portfolio is 98 per cent while the occupancy rate for retail is 92 per cent.
The retail space rate had been impacted by the Lee Theatre Plaza, which is under renovation. The renovation in the lower zone of the shopping arcade is scheduled for completion in the middle of 2013.
The vacancy rate for its residential portfolio is only 5 per cent.
The company proposed an interim dividend of 17 HK cents a share, up from 15 HK cents a year ago.
Shares in Hysan rose 3.73 per cent yesterday to close at HK$34.8.
Hysan's recurring underlying profit rose in the first half by this much, to HK$748 million, from a year earlier