Chairman Peter Lee Ting-chang said the office leasing sector experienced weakening demand during the review period. Locations with major new supply were particularly affected.

'The overall leasing market is expected to remain difficult in the second half,' Mr Lee said.

The depressed market forced Hysan to lower its office rentals by a 'double-digit'' rate when leasing agreements were due for renewal this year, he said.

Managing director Michael Lee Tze-hau said Hysan had either concluded or was at an advanced stage of completing negotiations for all leases due to expire this year.

He refused to disclose the size of the reduction in rents but said the group's office properties managed to achieve a better rate than the market level.

Rental at grade-A office buildings had fallen by up to 17 per cent in the first half, he said.

'The overall rent cut is at the lower end of double digits,'' he said.

Hysan has a portfolio of 4.7 million square feet of leasing properties, with 59 per cent, or 2.77 million sq ft, of office space. Retail space accounts for 1.12 million sq ft while the remainder is residential leasing.

Commenting on the retail sector, Mr Michael Lee said: 'Local consumer traffic largely resumed to normal levels by the end of June with Sars under control.

'There has been a steady return of tourists, particularly from China.'

During the period, the company's retail portfolio achieved 98 per cent occupancy level, excluding the Caroline Centre, which has been closed for renovations since March. The refurbishment is expected to be completed by the end of October.

Earnings per share fell to 24.24 cents, down 13.27 per cent from a year ago, and net gearing ratio was 25.9 per cent.