Landlords win ratings boost on firm demand
Fitch Ratings has upgraded credit ratings on four Hong Kong-based property investment firms, saying their rental income would further improve as demand for offices and shops remained strong amid robust economic growth.
Long-term foreign currency ratings were raised by one notch for Swire Pacific to 'A', Wharf (Holdings) and Hongkong Land Holdings to 'A-minus', and Hysan Development to 'BBB-plus', all with stable outlook.
'The upgrade reflects the buoyant momentum in Hong Kong's commercial property market,' Fitch said.
Grade A office rents rose 12 per cent in the first eight months while retail properties moved up 6 per cent, it said. Growth was particularly strong in Central and Sheung Wan, jumping 26 per cent.
'[Fitch] retains a positive outlook for the office and retail property markets as the factors driving the current growth - strong economic growth, low vacancy rates, positive employment growth expectations and relatively limited supply of new stock in key districts - remained unchanged,' it said.
Swire, which owns 13.29 million square feet of investment properties including Taikoo Place in Quarry Bay and Pacific Place in Admiralty, posted a year-on-year 17 per cent first-half profit growth to HK$2.7 billion.
Singapore-listed Hongkong Land is a major landlord in Central with a five million square foot office and retail portfolio, which has helped it sustain high occupancy rates and weather previous economic downturns.
Fitch said the upgrade on Wharf, which owns Harbour City in Tsim Sha Tsui and Times Square in Causeway Bay, reflected its stable leasing income generated by a well-located investment property portfolio, exposure to the container terminal business through Modern Terminals and prudent financial management.
Hysan, the largest landlord in Causeway Bay with a four million sq ft commercial and residential portfolio, enjoyed consistently high occupancy rates, Fitch said.
Terry Ng Sze-yuan, executive director at Hang Lung Properties, said yesterday demand for grade A offices was strong as many investment banks were looking to expand.
Mr Ng's comment was made during a media tour of the group's 1,800-unit residential project, Long Beach, in Tai Kok Tsui, West Kowloon, which will be offered at an average of HK$7,000 per square foot.