Swire Pacific Ltd., during its annual earnings conference March 15, said it is positive about rental income growth to be generated from both the office and retail sectors in 2018.
The Hong Kong-listed conglomerate's business spans five sectors, including property, beverages, aviation, marine services, trading and industrial. Swire Properties Ltd. is its listed property arm.
John Slosar, chairman of Swire Pacific and Swire Properties, revealed that the group has pre-leased 75% of the space at its new office tower — One Taikoo Place in Quarry Bay, Hong Kong — which is set to open later in 2018. The leasing commitments clinched were driven by the major trend of tenant decentralization in the city, Slosar added, making reference to the increasing number of corporates and conglomerates moving operations further out of Hong Kong's Central business district.
High occupancy levels amid limited supply will support Hong Kong's office rents in 2018, he also said.
"Looking forward, the new developments in our investment portfolio will continue to grow positively."
For the retail sector, the group's landmark Hong Kong mall, Pacific Place, recorded a 7% year-over-year increase in 2017 retail sales, outperforming the wider Hong Kong market's 2%. But the group also saw a 3% decline year over year in retail sales at its other Cityplaza mall asset in the city's Tai Koo Shing district.
"2017 was a great turnaround year for retail in Hong Kong," said Guy Bradley, CEO of Swire Properties, adding that he is bullish about the sector's recovery in the special administrative region.
"We do expect the turnaround will continue in 2018. More [Chinese] tourist spending is coming in thanks to the strength of the renminbi."
Bradley also added he does not think the expectation of an increase in interest rates will lead to a housing market correction, given there is still a lot of buyer interest and liquidity moving within Hong Kong.
Outside of the city, the group in 2017 gradually opened its 17.00 billion-yuan, 3,469,000-square-foot HKRI Taikoo Hui joint venture mixed-use development with HKR International Ltd. in Shanghai. The two hotels and serviced apartment building within the complex are scheduled to open in the first half of 2018.
In the meantime, Swire Pacific posted a 55% climb in its full-year 2017 underlying profit to HK$4.74 billion as the property sector gains helped to offset losses from its aviation and marine businesses.
The aviation division is still challenging and will continue to face intense competition for passenger business with other airlines and is expected to face pressure over yields, Slosar said. But he added that the group's Cathay Pacific airline unit posted a profit in the second half of 2017.
As of March 15, US$1 was equivalent to 6.32 yuan.
