Hongkong Land, the largest landlord in Central, expects grade A office rents to rise in line with current market rates this year as older leases become due for renewal.
John Witt, the firm's chief financial officer, forecasts grade A office rental reversions to remain positive, meaning rents will revert to present market levels, because of the low vacancy rates.
That's despite the broader decline of the office rental market, with global economic uncertainties seen to reduce demand this year.
'If we look generally, the vacancy rate of grade A offices in Central is 4 per cent only,' said Witt. 'The new supply of grade A offices in Central over the next three years is less than 100,000 sq ft each year. The supply is very tight, particularly in Central.'
Witt said the shortage of office space should support the market, although some analysts have voiced concerns that office rents may come under pressure as they did in the wake of the 2008 global financial crisis.
Last year, the firm's office portfolio in Hong Kong gained from positive rental reversions, particularly in the second half. Its average office rent rose 3.2 per cent to HK$87 per sq ft last year, from HK$84.3 per sq ft in 2010.
Rental occupancy also hit a record, surpassing the previous peak set in mid-2008. The vacancy rate at the end of last year was 2 per cent, down from 2.9 per cent in 2010. Hongkong Land also released its earnings results yesterday. It said underlying profit fell 13 per cent last year to US$703 million, from US$810 million in 2010.