Hongkong Land: Office Rental Pressure Remains; Luxury Retail More Resilient to Northbound Travelling

We have maintained our fair value estimate of USD 6.10 for narrow-moat Hongkong Land after its brief interim management statement for the first quarter of 2024 showed key drivers are largely in line. The negative rental reversion in the Hong Kong office portfolio was anticipated as leases were renewed at lower rates than the previous lease cycle. Still, occupancy showed a slight improvement to 92.9% from 92.6% at the end of 2023, despite new office completions in Central during the quarter. This compares with a 70-basis-point decline to 89.4% in March from the end of 2023 for overall Central Grade-A office occupancy, according to JLL.