Hongkong Land sees profit rise by 20pc
Increase comes despite subdued conditionsin HK and Singapore office markets
Hongkong Land, the largest landlord in Central, achieved 20 per cent growth in underlying profit last year even though the office markets in Hong Kong and Singapore were in a down cycle.
The Singapore-listed developer's underlying profit grew to US$935 million from US$776 million in 2012. But its net profit dropped 17 per cent to US$1.19 billion because of a 61 per cent fall in property revaluation gains.
The firm said leasing activity in the Hong Kong office market remained soft last year because of subdued demand from the key financial services sector. However, it was still able to increase rents for lease renewals.
The average rent for office space increased 10 per cent to HK$99 per square foot, while the vacancy rate improved from 5.6 per cent in the middle of the year to 5 per cent by year-end.
Company chairman Ben Keswick said the commercial markets in Hong Kong and Singapore were expected to remain "broadly stable" in the year ahead.
Lee Wee Liat, the head of property research at BNP Paribas Securities, said Hongkong Land had been able to increase rents because leases renewed last year had originally been signed three years earlier and rents had been lower in 2010.
"But this year, the level of positive rental reversion will be mild or the rents will be flat as the leases signed in 2011 were at market peak," Lee said.
He said office rents had been in a down cycle over the past two years, but a lack of new supply in Central amid a recent improvement in demand pointed to a recovery in rents this year.
In the retail market, strong demand for space saw Hongkong Land's average retail rent surge 18 per cent to HK$201 per square foot last year.
The company's operating profit from residential property development jumped 43 per cent to US$201.1 million. The strong growth was due to the contribution from three projects in Singapore.
Contracted sales surged 47 per cent to US$632 million, but a decline is expected this year as the company waits for projects to be completed.